Calculating the Holding Period Return

An investment's holding period return is determined by dividing the sum of the investment's current income and capital gains/losses by its beginning value. The equation looks like this:

Holding period return can be either negative or positive and can be calculated using either historical or forecast data. It can also be calculated in both pre- and after-tax rates. HPR is a way of measuring the rate of return of an investment per invested dollar. HPR is only appropriate for comparing the relative returns of investments with equal holding periods. (Otherwise, an "apples to apples" comparison can't be made.)

Now let's calculate and compare the HPRs of two different investments.

As you can see, even though the real estate investment had a higher total return, its HPR was lower than that of the stock. This means the stock has a higher return per invested dollar, making it a more efficient investment.