Unit 22: Performance Measures Flashcards
Total Return
annual return, includes income from divs/interest, and capital appreciation
Mutual fund returns
also include capital gain distribution. if looking for current yield/income, it does not include capital gains distribution
holding period return
same as total return, but for any designated period
annualized return
if an investment is not held for a year, you can calculate what the return would have been for a year.
annualization factor
=12/holding period
real rate of return
subtracting inflation rate from nominal rate of return.
TIPS return
every 6 months the semiannual interest is paid, also the principal can increase by the inflation rate, and the coupon will increase via the higher principal amount. compounding.
after tax return
=1-tax rate
probable/expected return
weighted average of possible return values to obtain expected return.
risk adjusted return (Sharpe ratio)
(return-risk free)/standard deviation
Internal Rate of Return (IRR)
-the preferred method of measuring the return on a DPP;
-considers the time value of money;
-equal to YTM
time-weighted return
ignores any additional cash flows, to isolate investment performance
dollar-weighted return
includes any subsequent purchasing/selling.
-is also the IRR
Index with the broadest coverage of US stock market
Wilshire 5000
Large cap benchmark
S&P 500
