# Holding Period Return (Yield)

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## Definition of 'Holding Period Return (Yield)'

The holding period return (HPR) is the return on an investment over a specific period of time. It is calculated by taking the ending value of the investment and subtracting the initial value, then dividing the result by the initial value. The HPR can be expressed as a percentage or a decimal.

For example, if an investment is worth \$100 at the beginning of a year and \$110 at the end of the year, the HPR is 10%. This is calculated by taking \$110 - \$100 = \$10, then dividing \$10 by \$100 = 0.10, or 10%.

The HPR is a useful measure of investment performance because it takes into account both the change in the investment's value and the length of time the investment was held. It is important to note that the HPR does not take into account the risk of the investment.

There are two main types of HPR: arithmetic and geometric. The arithmetic HPR is simply the average annual return over the holding period. The geometric HPR is the compound annual return over the holding period. The geometric HPR is often considered to be a more accurate measure of investment performance because it takes into account the compounding effect of interest and dividends.

The HPR can be used to compare the performance of different investments over the same period of time. It can also be used to compare the performance of an investment to a benchmark, such as the S&P 500 index.

The HPR is a valuable tool for investors, but it is important to understand its limitations. The HPR does not take into account the risk of the investment, and it does not account for the time value of money.

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