Definition for : Holding-period return

The holding-period Return is calculated from the total sum of cash flows for a given Investment, i.e. Income, in the form of Interest or dividends earned on the funds invested and the resulting capital gain or loss when the Security is sold: F1/V0 + (V1 – V0)/V0 = Income + capital gain or loss, where F1 is the Income received by the investor during the period, V0 is the Value of the Security at the beginning of the period, and V1 is the Value of the Security at the end of the period. This formula holds for one period. If there is more than one period, the equation should take into account the number of periods.

(See Chapters Chapter 18 Risk and return and Chapter 19 The required rate of return of the Vernimmen)

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