Stock Return Definition, Calculation and Quiz

1. Define - Learn the stock return calculation.
2. Context - Use stock return in a sentence.
3. Quiz - Test yourself.

by Paul Alan Davis, CFA

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How to Calculate Stock Returns

Beginner

Stock Return is the calculation of percent rate of return over a measurement period. The calculation requires several inputs, share price gains or losses; corporate actions like splits and spin-offs; and finally returns of capital in the form of special and regular dividends.

Synonym: total return

Like any investment return actually, the formula includes all forms of return into the ending value, then divide that by the beginning value and subtract one.

• Total Return = ((Price After + Returns of Capital) / (Starting Price)) - 1

So as an example, a stock that started at $10.00 and ended at $10.40 and paid a $0.10 dividend had a return of 5.00% for the period.

For context, in most cases calculating a rate of return for a stock seems like it would be rather straightforward, and in some cases it is, particularly when a stock doesn't pay dividends. Return can get quite complex once stock splits, corporate spin-offs and dividends are taken into account. (See the link below to our Quant 101 course where we go through an example in Excel).

For monthly returns, because returns of capital may occur mid-month, it is common to calculate daily returns and link them to get monthly returns.

In a Sentence

Ann:  Our data provider adjusts for corporate actions when calculating stock return.
Kay:  Good. They didn't teach us about that in college.

Video

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Videos can also be accessed from our YouTube Channel.

Video Script

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Quiz

Click box for answer.

Questions or Comments?

Still unclear on calculating Stock Return? Check out the Quant 101 Series, specifically Calculate Monthly Returns on Stocks in Excel.

Related Terms

Our trained humans found other terms in the category performance basics you may find helpful.

• Active Return
• Benchmark Return
• Portfolio Return
• Total Return

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• To review Standard Deviation for investments, hit Back.
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• To stick with the theme and discuss Stock Risk, click Next.

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