Lesson 2 of 10 · All lessons in this module
- What an interest rate is made of
- Holding period return
- Arithmetic and geometric mean returns
- Harmonic, trimmed and winsorized means
- Money-weighted return
- Time-weighted vs money-weighted returnVideo lesson
- Integrated cases: balance tables, money-weighted and time-weighted returns
- Annualised and continuously compounded returnsVideo lesson
- Gross, net, after-tax, real and leveraged returnsVideo lesson
- Integrated cases: from total return to what the investor keeps
Lesson 2 of 10 · 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): . The period can be a day or ten years.
- To link several periods, multiply the 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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