Finance question: what is best way to calculate stock annual return

novice_2010 · #1 (**permalink**) 03-25-2010, 03:21 PM

Hello, All

Suppose I have daily historical stock price between Jan 1 and Dec 31, what is the proper way to calculate the annual return?

I know some people just use tow prices to calculate, which are the price on Jan 1 and the price on Dec 31. However I feel uncomfortable about this method because the information from other days' price is completely ignored.

Is there any better way to calculate the annual return? Any paper or article recommended?

Thanks!

brian · #2 (**permalink**) 03-25-2010, 05:37 PM

Are you including dividends in the return?

isralexba · #3 (**permalink**) 03-25-2010, 07:01 PM

hi,
please also note that sometimes there are splits in the stock price and this can affect the result

sapphirecapital · #4 (**permalink**) 03-25-2010, 10:00 PM

Calculating the Rate of Return on Investments

debt.advisor · #5 (**permalink**) 08-30-2011, 12:19 AM

Many nonprofit organizations produce reports. These reports could be annual reports that sum up their work during the year or reports about subjects where the organization has expertise. The report is often an important piece of research designed to show leadership on an issue and attract the attention of the press and governments to affect social change.

expert.debt · #6 (**permalink**) 08-31-2011, 11:11 AM

There are two ways to measure the rate of return on an investment.

Average annual rate of return (also known as average annual arithmetic return)

Compound rate of return (also called average annual geometric return)

By using the formulas for calculating the average annual rate of return, we get a percentage that measures gains accurately over only a short period. Whereas, the geometric or compound rate of return is a better yardstick to measure your investment over the long run.

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