NISM Certifications · NISM-Series-XV: Research Analyst · Fundamentals of Risk and Return
In the context of risk and return, what does the 'holding period return' of an equity share measure?
Holding period return measures the total return from price change plus income such as dividends over the period, divided by the beginning price. It captures both capital gain and income, unlike a measure that uses only one component, and it is not a risk measure.
- AOnly the dividends received during the holding period, expressed as a percentage of price
- BTotal return from price change plus income received over the period, relative to the beginning priceCorrect
- COnly the capital gain between purchase and sale, ignoring all income
- DThe annualised standard deviation of returns during the holding period
Explanation
Holding period return combines capital appreciation and income (such as dividends) and divides by the opening value. Options that use only dividends or only price change leave out one component. Standard deviation measures risk, not return.
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