Holding period return
Holding period return is the total return earned while an investment is held, equal to (ending price − beginning price + income received) ÷ beginning price.
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A share bought for €40 pays a €2 dividend and is later sold for €46. Price gain contributes €6 and the dividend contributes €2, for a total gain of €8 on the €40 invested. Holding period return is €8 ÷ €40, or 20%.
Where it fits
TopicRisk, Return & the CAPMCoreSubjectCorporate FinanceCore
The formula
LaTeX
Variables
- Beginning price (€)
- Ending price (€)
- Income received during the holding period (e.g. dividend or coupon) (€)
The total return earned over the exact period an asset is held, combining price change and any income received during that period.
Check yourself
PracticeCORE
An investor buys a share for €120. During the holding period the share pays a €6 dividend, and it is then sold for €108. What is the holding period return?
Select an answer to check your understanding.