Holding Period Returns (HPRs) for 5 Different Asset Classes

Holding period return (HPR) means the same thing as one-period rate of
return, 𝐻𝑃𝑅𝑡 = 𝑟𝑡 , where 𝑝𝑡 denotes the market price at the end of time
period t. Eqn.(1) defines the HPR from a long position in common stock or
preferred stock that may or may not pay the investor a cash dividend of d
dollars.
𝑃𝑟𝑖𝑐𝑒 𝑎𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝐶𝑎𝑠ℎ 𝑑𝑖𝑣.,
( )+( ) (𝑝𝑡 − 𝑝𝑡−1 )+(𝑑𝑡 )
𝑜𝑟 𝑙𝑜𝑠𝑠 𝑖𝑓 𝑎𝑛𝑦
𝑟𝑡 = = (1)
(𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒 𝑎𝑡 𝑠𝑡𝑎𝑟𝑡 𝑜𝑓 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑) 𝑝𝑡−1

The HPR for a short position in a stock is:

𝑃𝑟𝑖𝑐𝑒 𝑎𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝐶𝑎𝑠ℎ 𝑖𝑛𝑐𝑜𝑚𝑒
−( )−( , 𝑖𝑓 𝑎𝑛𝑦 )
𝑜𝑟 𝑙𝑜𝑠𝑠
𝑟𝑡 = (2)
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒 𝑎𝑡 𝑠𝑡𝑎𝑟𝑡 𝑜𝑓 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑

The HPR from a long position in a bond that pays periodic coupon interest of
c dollars per time period is:
𝑃𝑟𝑖𝑐𝑒 𝑎𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑢𝑝𝑜𝑛,
( )+( ) (𝑝𝑡 − 𝑝𝑡−1 )+(𝑐𝑡 )
𝑜𝑟 𝑙𝑜𝑠𝑠 𝑖𝑓 𝑎𝑛𝑦
𝑟𝑡 = = (3)
(𝑃𝑢𝑟𝑐ℎ. 𝑝𝑟𝑖𝑐𝑒 𝑎𝑡 𝑠𝑡𝑎𝑟𝑡 𝑜𝑓 𝑝𝑒𝑟𝑖𝑜𝑑) 𝑝𝑡−1

Long positions in futures contracts on commodities or foreign exchange

involve no periodic cashflows, so the HPR is simply the commodity’s
percentage price change each period.
(𝑃𝑟𝑖𝑐𝑒 𝑎𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑜𝑟 𝑙𝑜𝑠𝑠) (𝑝𝑡 − 𝑝𝑡−1 )
𝑟𝑡 = = (4)
(𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒 𝑎𝑡 𝑠𝑡𝑎𝑟𝑡 𝑜𝑓 𝑝𝑒𝑟𝑖𝑜𝑑) 𝑝𝑡−1

Someone who owns and rents a home earns the following one-period rate of
return.
(𝑃𝑟𝑖𝑐𝑒 𝑎𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑜𝑟 𝑙𝑜𝑠𝑠)+(𝐶𝑎𝑠ℎ 𝑟𝑒𝑛𝑡) (𝑝𝑡 − 𝑝𝑡−1 )+(𝑅𝑒𝑛𝑡𝑡 )
𝑟𝑡 = = (5)
(𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒 𝑎𝑡 𝑠𝑡𝑎𝑟𝑡 𝑜𝑓 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑) 𝑝𝑡−1

You should be able to figure out the HPR formulas for short positions on
bonds, commodities, foreign exchange, and real estate by studying Eqns.(1)
through (5).