Holding Period Return
Holding period return is a introductory way to assess how much return investor have obtained on a specific investment. This computation is on a per-dollar-invested basis, rather than a time basis, which makes it difficult to compare returns on various investments with various time frames.
The total return experienced from holding an asset or the portfolio of assets. Holding period return/yield is computed as the sum of all income and capital growth divided by the value at the starting of the period being assessed.
The Holding Period Return is an investment assess that calculates the return investor have received on the investment over the length of time that investor have held the investment. It is a simple computation that could be employed to compare the rate of return versus a target rate of return or to equate various investment opportunities to see which one produces the highest return. Annualized the Holding Period Return permit us to compare investments with various holding periods to each other.
For Instance, suppose investor purchase as share of a stock for $100. Investor anticipate it to compensate a $4 dividend at the end of the year and investor anticipate the price of the share to raise to $113. Our dividend income will be 4% and the capital gains will be (113/100) = 13%. The total holding period return will be the sum of the capital gains yield and the dividend income yield,
13%+4%=17%.
HPR = ($113 -$ 100 + $4) / $100 = 17%
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