HPR = "Holding Period Return"
Capital Gains = (Value of investment at beginning of period) - (Value of investment at end of period)
|The HPR assumes a "buy and hold" strategy. That is, an investor "holds" an investment for a set period of time. It also assumes the dividend is paid at the end of the holding period. Convention dictates that the HPR is calculated over a 1-year period.
Example: If you purchased a stock with a 4% dividend yield for $100 per share and sold it a year later for $110, what was your holding period return?
Answer: (110 - 100 + 4) / 100 = 14%
For further information, see the Equity and Capital Markets class website at FIN 4504.