Holding Period Returns
Perhaps the simplest type of return is a holding period return. A holding period return measures the return on an investment over the time period that the investment was held. The time period may be less than a year or more than a year. The important fact to remember is that a holding period return is not annualized, so the investor must be careful when comparing holding period returns.
Consider the following two examples.
- • Example: William purchased 300 shares of Regal Robots Corporation at $100 per share. Five years later, he sold the shares at $200 per share. What was William’s holding period return?
The answer is: 100%. Following the formula above we get:
original investment = 30
