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Lesson 4 of 9 · 12 min

Holding period return

A holding period return measures everything you earned over one stretch of time, price change plus income, relative to what you paid.

In short

  • Total return = income yield (dividends, coupons) + capital gain or loss (price change).
  • Holding period return (HPR): R=(P1−P0+I1)/P0R = (P_1 - P_0 + I_1)/P_0. The period can be a day or ten years.
  • To link several periods, multiply the (1+R)(1+R) terms and subtract 1. Never add returns across periods.
  • Losses need larger gains to recover: after −40% you need +66.7% to break even.
  • Decimal, fraction and percentage are interchangeable: 0.07 = 7/100 = 7%.

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Holding period return · Returns of Financial Assets and Instruments