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Risk (Returns (Dollar Returns (Terms (Dividends (The income payment of a…
Risk
Returns
Dollar Returns
Terms
Dividends
The income payment of a stock
Capital gain or loss
The Change in value of the stock itself
( Current stock price - price you bought at) X # of shares
Even if you don't sell your stocks you consider the capital gain (Not sure why) :!?:
Total Dollar Return= Dividend income + Capital gain ( or loss)
Total cash if stock is sold = Initial investment + Total dollar return
Proceeds from stock sale + dividends
Last 2 equations must match
Percentage Returns
How much return are we getting for each dollar invested?
Terms
Dividend yield
The percentage you're getting back in dividends from your investment of buying the stock
Capital Gain
(Price of stock at the end of the year - Initial Price of the stock)/Initial Price of the stock
Holding Period Returns
Traits
Not adjusted for taxes or transaction costs
Holding comes from the fact that you're holding onto the stock for multiple years
The percentage of profit made
This is pretty much determining the return on a stock given that the profitability of your stock could change drastically
Pretend that you start with some initial investment and only look later when you sell at your final investment. The holding period return is just seeing the difference in percentage of the profit
If we have a holding period return of 57% it means that our investment throughout the time that we were holding the stock improved by 57%
Equations
Risk Premium
The difference in the average return of a stock and the risk free rate
Return Statistics
Average Stock Returns and Risk free returns
Risk statistics
More on Average Returns