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