5 Performance Measures Flashcards
Holding Period Returns
return over time period held
not annualized
gain or loss
= ——————————
original value
Annualized Returns
accounts for time value of $ / compounded interest
ending value
orig value
= ———————————————-
(# years held) 1 / #years held - 1
(for 1/2 yr 0.5)
accounts for time value of $ / compounded interest
Annualized Return
Return % (holding period ret)
= —————————————————
yrs held (.5 for half yr)
Total Return
Gain/Loss + DIV or INT
= ———————————————-
Orig Investment
Mode
most common score
Median
middle score
for even #, average two middle
Mean
average
Geometric Mean
[(1 + ann ret) x (1 + ann ret)] 1/ #years - 1
Real Rate Return
(Inflation Adj)
assesses purchasing power
< 0 not keeping up w/ inflation
RRR = Tot Ret - Inflation Rate
Tax
Ord Income
15 /25 %
Ord Income - short-term cap gains, INT
15/25- long-term CG, Div
Holding period
starts day after inv purchased
ends day sold
long-term - held for more than 1 year
Standard Deviation
High Volatility = High Standard Deviation = High Risk
Correlation Coefficient
measures performance of 2 SEC
how their returns compare/move together
Correlation Coefficient
1
0
-1
1 - perfectly correlated, = movement
0 -no correlation, independent
-1 - inverse correlation, A up 2%, B down2%
unsystematic risk
specific sec w/in portfolio
decline due to specific factors
