Holding Period Return (HPR) is a key metric used to measure the total return earned by an investor on an asset or investment over a specific holding period. It reflects both income generated (like dividends or interest) and capital appreciation or depreciation in the value of the investment. HPR helps investors evaluate the overall profitability of their investment, irrespective of the time duration.

The formula for calculating Holding Period Return is:

HPR = [(Ending Value ñ Beginning Value) + Income Received] / Beginning Value ? 100

For example, if an investor buys a stock for ?1,000, receives ?50 in dividends, and sells it later for ?1,200, the HPR would be [(?1,200 ñ ?1,000) + ?50] / ?1,000 ? 100 = 25%. This means the investor earned a total return of 25% during the holding period.

HPR can be applied to any investmentóstocks, bonds, mutual funds, or real estate. It provides a comprehensive view of returns by combining both income and price appreciation, unlike measures that only focus on one aspect. However, since HPR does not account for the length of time an investment is held, it may not be ideal for comparing investments held for different durations. In such cases, the annualized return offers a better comparison.

In summary, Holding Period Return is a simple yet powerful measure to evaluate investment performance over any period. It helps investors assess whether their investment decisions are aligned with their financial goals and risk tolerance, making it a valuable tool for portfolio analysis and performance tracking.