Stock returns

Definition

Stock returns represent the gains or losses made on an investment in stocks over a particular period. They are typically measured as a percentage change in the stock price, including dividends received.

5 Must Know Facts For Your Next Test

1. Stock returns can be calculated using the formula: (Ending Price - Beginning Price + Dividends) / Beginning Price.
2. Historical average stock returns in the U.S. have been around 10% annually before inflation adjustments.
3. Stock returns are influenced by factors such as company performance, economic conditions, and market sentiment.
4. Compounded annual growth rate (CAGR) is often used to measure stock returns over multiple periods.
5. U.S. stock markets have shown long-term upward trends despite short-term volatility and market crashes.

Review Questions

• How do you calculate stock returns?
• What has been the historical average annual return for U.S. stocks?
• Name three factors that influence stock returns.

Related terms

Dividend Yield:

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Capital Gains: Capital gains refer to the profit made from selling an asset like stocks at a higher price than its purchase price.

Volatility:

Volatility measures the degree of variation of a trading price series over time, indicating the level of risk associated with an asset's price changes.