What is the 'Holding Period Return/Yield'
The total return received from holding an asset or portfolio of assets over a period of time, generally expressed as a percentage. Holding period return/yield is calculated on the basis of total returns from the asset or portfolio – i.e. income plus changes in value. It is particularly useful for comparing returns between investments held for different periods of time.
Holding Period Return (HPR) and annualized HPR for returns over multiple years can be calculated as follows:
Holding Period Return =
Income + (End of Period Value – Initial Value) / Initial Value
Annualized HPR =
{[(Income + (End of Period Value – Initial Value)] / Initial Value+ 1}^{1/t} – 1
where t = number of years.
Returns for regular time periods such as quarters or years can be converted to a holding period return through the following formula:
(1 + HPR) = (1 + r_{1}) x (1 + r_{2}) x (1 + r_{3}) x (1 + r_{4}) where r_{1}, r_{2}, r_{3}and r_{4}are periodic returns.
Thus, HPR = [(1 + r_{1}) x (1 + r_{2}) x (1 + r_{3}) x (1 + r_{4})] – 1
BREAKING DOWN 'Holding Period Return/Yield'
The following are some examples of calculating holding period return:
1. What is the HPR for an investor who bought a stock a year ago at $50 and received $5 in dividends over the year, if the stock is now trading at $60?
HPR = [5 + (60 – 50)] / 50 = 30%
2. Which investment performed better? Mutual Fund X that was held for three years, during which it appreciated from $100 to $150 and provided $5 in distributions, or Mutual Fund B that went from $200 to $320 and generated $10 in distributions over four years?
HPR for Fund X = [5 + (150 – 100)] / 100 = 55%
HPR for Fund B = [10 + (320 – 200)] / 200 = 65%
Note that Fund B had the higher HPR, but it was held for four years, as opposed to the three years for which Fund X was held. Since the time periods are different, this requires annualized HPR to be calculated, as shown below.
3. Calculation of annualized HPR:
Annualized HPR for Fund X = (0.55 + 1)^{1/3} – 1 = 15.73%
Annualized HPR for Fund B = (0.65 + 1)^{1/4} – 1 = 13.34%
Thus, despite having the lower HPR, Fund X was clearly the superior investment.
4. Your stock portfolio had the following returns in the four quarters of a given year: +8%, 5%, +6%, +4%. How did it compare against the benchmark index, which had total returns of 12% over the year?
HPR for your stock portfolio = [(1 + 0.08) x (1 – 0.05) x (1 + 0.06) x (1 + 0.04)] – 1 = 13.1%
Your portfolio therefore outperformed the index by more than a percentage point (however, the risk of the portfolio should also be compared to that of the index to evaluate if the added return was generated by taking significantly higher risk).

Annualized Total Return
The average amount of money earned by an investment each year ... 
Time Value of Money  TVM
The idea that money available at the present time is worth more ... 
Continuous Compounding
The process of earning interest on top of interest. The interest ... 
Total Return
When measuring performance, the actual rate of return of an investment ... 
Ending Market Value (EMV)
The value of an investment at the end of the investment period. ... 
Correlation
In the world of finance, a statistical measure of how two securities ...

Trading
Calculating the Holding Period Return/Yield
Holding period return/yield is the return on an investment or portfolio during the time it is held. 
Managing Wealth
Dissecting the Simple Interest Formula
Simple interest ignores the effect of compounding: it's only calculated on the principal amount. This makes it easier to calculate than compound interest. 
Managing Wealth
Investing $100 a Month in Stocks for 20 Years
Learn how a monthly investment of just $100 can help build a future nest egg using properly diversified stocks or stock mutual funds. 
Investing
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Markets
Calculating Future Value
Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. 
Managing Wealth
Breaking Down The Geometric Mean
Understanding portfolio performance, whether for a selfmanaged, discretionary portfolio or a nondiscretionary portfolio, is vital to determining whether the portfolio strategy is working or ... 
Managing Wealth
How To Measure Returns On The Series 65 Exam
An investor who is evaluating the performance of a portfolio manager must take into consideration the impact that any contributions or withdrawals made by the investor will have on the overall ... 
Markets
The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate
The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ... 
Managing Wealth
Learn Simple And Compound Interest
Interest is defined as the cost of borrowing money, and depending on how it is calculated, can be classified as simple interest or compound interest. 
ETFs & Mutual Funds
Understanding Mutual Fund Returns
By Richard Loth (Contact  Biography)The return on any investment, measured over a given period of time, is simply the sum of its capital appreciation and any income generated divided by the ...

John purchased 100 shares of XYZ stock for $50 per share. He held the stock for ...
The correct answer is b. The Holding Period Return (HPR) is the total return (income, dividends, plus capital appreciation ... Read Answer >> 
What is the formula for calculating net present value (NPV)?
Learn about the formula for net present value (NPV) and how this calculation is used in capital budgeting to determine which ... Read Answer >> 
What is the difference between a company's annual return and its annualized return?
Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >> 
A U.S. investor purchased some shares in Germany for 25 euros and sold them a year ...
Free info on financial certification exams including study guides, exam questions, and much more! Read Answer >> 
How do I calculate my portfolio's investment returns and performance?
Learn the basic principles underlying the data and calculations used to perform personal rates of return on investment portfolios. Read Answer >> 
How can I calculate the expected return of my portfolio?
Understand the components of the equation used to calculate the expected return of an investor's portfolio. Learn why the ... Read Answer >>