Financial Return

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Financial glossary Financial glossary

Return is the ratio between the change in value of an asset and the value it had at the beginning of the observation period, including the income accrued during the investment period (“interest” for bonds or “dividends” for stocks).
In other words, it represents the percentage gain (or loss) of an asset. When we talk about yield, we usually mean Yield to Maturity (YTM).

Examples of the yield calculation:

  • If the value of an asset is 100 at the start of the investment period and 105 at the end of the period, the yield is 5%.
  • If the asset has paid a coupon of 3 at the end of the investment period, the yield increases by 3% and reaches 8%.

If you calculate the return on an asset and parameterize it over a year, you can compare different assets.

Further return metrics are the money-weighted rate of return and the time-weighted rate of return.

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