Are you tired of calculating stock returns manually? Say no more! Let’s dive into the world of stock return calculation and find out the formula that makes us all rich (or not).
Stock Return Calculation Formula
Here is the formula you’ve been waiting for:
((Current Stock Price - Initial Stock Price) / Initial Stock Price) x 100
Now, let’s move on to the different types of stock return calculations and their interpretation.
Stock Return Calculation Categories
| Category |
Range |
Interpretation |
| Daily |
-100% to 100% |
Indicates the daily gain or loss of the stock. |
| Monthly |
-100% to 100% |
Indicates the monthly gain or loss of the stock. |
| Yearly |
-100% to 100% |
Indicates the yearly gain or loss of the stock. |
| Cumulative |
-100% to Infinity |
Indicates the overall gain or loss of the stock since the initial investment. |
Examples of Stock Return Calculations
| Name |
Initial Investment |
Current Investment |
Timeframe |
Stock Return |
| John Doe |
$5000 |
$7000 |
1 year |
40% |
| Jane Smith |
£1000 |
£800 |
6 months |
-20% |
| Bob Ross |
$200 |
$250 |
1 month |
25% |
Different Ways to Calculate Stock Return
| Method |
Advantages |
Disadvantages |
Accuracy Level |
| Simple Return |
Easy to Calculate |
Ignores Time Value of Money |
Low |
| Holding Period Return |
Considers Time Value of Money |
Only Considered for Specific Time Period |
Medium |
| Logarithmic Return |
Considers Compounding |
Difficult to Calculate |
High |
Evolution of Stock Return Calculation
| Year |
Developments |
| 1900s |
Simple Return Formula |
| 1920s |
Holding Period Return Formula |
| 1960s |
Logarithmic Return Formula |
Limitations of Stock Return Calculation Accuracy
- Market Fluctuations: Stock prices can vary significantly over a short period of time, leading to inaccurate returns.
- Dividends: Stock return calculation does not consider dividends gained from the investment.
- Inflation: Stock return calculation does not consider the impact of inflation on the investment.
Alternative Methods for Measuring Stock Return Calculation
| Method |
Pros |
Cons |
| Risk-Adjusted Return |
Considers Risk |
Difficult to Calculate |
| Sharpe Ratio |
Considers Risk and Return |
Historical Data Dependent |
| Treynor Ratio |
Considers Risk and Market Portfolio |
Historical Data Dependent |
FAQs on Stock Return Calculator and Stock Return Calculations
- What is Stock Return Calculation? Stock return calculation is the process of determining the profit or loss earned on a stock investment over a period of time.
- What is a good stock return percentage? A good stock return percentage varies depending on the investment goals and risk appetite of the investor.
- What is the difference between simple return and logarithmic return? Simple return is calculated by dividing the profit or loss by the initial investment, while logarithmic return considers the impact of compounding.
- How often should stock return be calculated? Stock return can be calculated daily, monthly, yearly, or cumulatively, depending on the investment goals.
- What is the impact of dividends on stock return calculation? Stock return calculation does not consider dividends gained from the investment, leading to inaccurate returns.
- What is the impact of inflation on stock return calculation? Stock return calculation does not consider the impact of inflation on the investment, leading to inaccurate returns.
- What is the difference between holding period return and cumulative return? Holding period return is considered for a specific time period, while cumulative return is the overall gain or loss of the stock since the initial investment.
- What is the difference between risk-adjusted return and Sharpe ratio? Risk-adjusted return considers the risk of the investment, while Sharpe ratio considers the risk and return.
- What is the difference between Sharpe ratio and Treynor ratio? Sharpe ratio considers the risk and return, while Treynor ratio considers the risk and market portfolio.
- How can I improve my stock return? Improving stock return requires a thorough understanding of the stock market and investment strategies. Seeking advice from financial experts can also be helpful.
Reliable Government/Educational Resources on Stock Return Calculations
- Investopedia This educational resource provides information on different investment strategies, including stock return calculation.
- SEC.gov This government resource provides information on securities, investments, and market regulation.
- ED.gov This government resource provides information on financial aid, student loans, and investment opportunities.
