Holding Period Return (HPR) is the return received during the holding period of a portfolio of assets or individual assets. The holding period is the period of time when the stock is kept in one’s possession; that is, it is the time from buying an asset till it gets sold in the market.The HPR is the total market return received from holding a set of assets or a singular asset over a given period. It is usually expressed as a percentage value. The HPR is calculated from the total returns of either the set of assets or the portfolio. The ... Read More

The standard deviation (SD) of a dataset is its average amount of variability. It indicates how far each of the data values in a given distribution deviate from the mean, or center, of the distribution. In the case of normal distributions, a larger standard deviation means that the given values are generally far from the mean, while a smaller standard deviation indicates the values are clustered closer to the mean.Variance is the average of the squared SDs from the mean. To count variance, one needs to first subtract the mean from each number and then square the outcomes to find ... Read More

Portfolio Return refers to the loss or gains realized by a portfolio of investment containing several types of investments. Portfolio Return aims to meet the preferred benchmarks, meaning a well-diversified portfolio of stock/bond holdings or a given mix of the two asset classes. Portfolios aim to deliver returns based on the promised investment strategy objectives, and the risk tolerance.Investors typically are interested in one or more sets of portfolios and their aim is to get a balanced return back over time. Many types of portfolios are available to investors right from equities, debt to Balanced Fund consisting of a mix ... Read More

The Dividend Discount Model or the Gordon Growth Model is a share valuation method that determines a stock’s intrinsic value. This method does not consider the current market conditions. Investors can compare companies against each other using this simple model. Dividend discount model is called "perpetual growth model" because the dividends are usually paid till infinity.Assumptions for Gordon Growth ModelThe Gordon Growth Model considers the following conditions −The company has a stable business model, i.e., there are will be no significant changes in its operations in future.The company will have a stable financial leverage.The company’s growth is constant and unchanging.The ... Read More

Capitalized Dividends are dividends due on the Preferred Shares which are capitalized by adding them to the Stated price of the Preferred Shares.As most closely held companies do not pay dividends, to determine dividend capitalization, the evaluators must first find out the dividend paying capacity of the business. The Dividend paying capability of a company is based on the average net income and the average cash flow. To calculate dividend paying capacity, debt repayment, expansion plans, operation cushion, dividend paying history of a business contractual requirements, past and dividends of a comparable company should be analyzed, among others.After analyzing the ... Read More

Correlation is a term that is a measure of the power of a linear relationship within two quantitative variables (e.g., height, weight). There are mainly two types of correlation depending on the movement of the variables −Positive correlation – In a Positive correlation of two variables, both the variables move in the same direction. This means when the value of one variable goes up, the other also increases and vice versa. For example, the more fuel you burn, the more distance you can travel with an automobile.Negative correlation – In case of negative correlation, when one variable increases the other ... Read More

The equity capitalization rate (ECR) is the capitalization rate that shows the relation between the income from the property in comparison to the equity of the investor. ECR is an important metric as it measures the real cash return at the time of acquisition, i.e., the investor’s money.Usually, the investor’s own funds contribute towards the acquisition cost of the property. If no there is no loan in financing the acquisition of the property, then the investor’s equity is the net acquisition cost. Otherwise, the investor’s equity is the property acquisition cost from which the loan amount is deducted.The formula for ... Read More

The PE ratio is the present price of the stock divided by the expressed earning per share of the stock. The PE of a stock is a subject to regular change. As the future retained earnings of a company are often found in the price of a stock, the PE ratio signifies up to what extent the stock price is valued at the earnings of the stock of the last year.PE gives the price one is ready to pay for Re 1 of a company's earnings. As the future net earnings of a company is often uncertain, strong companies can ... Read More

Investors can be categorized into several types based on their risk preferences. Risk preference is the intention of investors of taking risks. Usually, higher returns are associated with higher risk-taking capability, while lower risks yield lower returns. Risk-averse and risk-neutral investors are categories that divide investors into two types, considering their risk-taking intentions.Risk-averse InvestorsRisk-averse investors are interested in the lowest risk securities and for them, the weight of the investments is more important than the accumulated returns. These investors would almost always choose securities that guarantee lower returns with the least amount of risks. As is obvious, the risk-averse investors ... Read More

In a supernormal growth phase, the stock price increases at a rapid pace. The period in which such anomaly occurs lasts beyond a year. After the supernormal growth, the share shows general properties and grows at a normal rate. Super annual growth is a common phenomenon, provided there is demand for the product produced by the company in the market.Dividend Discount Model: No Dividend Payments GrowthPreferred shares usually pay the stockholders a fixed amount in certain periods. Finding the next present value will give the implied value of the stock.For example, if the company has to pay INR 1.50 in the ... Read More