It is one of the simplest and most important measures of investment performance.
HPR is the change in value of an investment, asset or portfolio over a particular period.
where the End Value includes income, such as dividends, earned on the investment: where
Assuming income and capital gains and losses are reinvested, i.e. retained in the portfolio, then: t being the length of the holding period, measured in years.
(However, investment performance professionals generally advise against quoting annualized return over a holding period of less than a year).
To the right is an example of a stock investment of one share purchased at the beginning of the year for $100.
The stock share bought for $100 can only be sold for $98, which is the value of the investment at the end of the first quarter.
This is less than the purchase price, so the investment has suffered a capital loss.