Risk and Returns

4 important questions on Risk and Returns

What does the return of a shareholder consist of?

1. Cash earned (dividends or interest)
2. Change in value of share

What is the arithmetic return method?

You look at historical figures and make an estimation of the average return in a certain period, so you use the means of the returns of the past periods

What is the geometric return method?

Uses the geometric mean when the arithmetic mean has too many outliers to provide a realistic view. It looks at the average compounded rate of return per year. Always smaller or equal to the arithmetic mean.
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What is the holding period return method?

The total return you earn by keeping a particular property over a certain period. It shows the performance of a fund in a certain period.

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