COMM 308 Chapter 8: Risk, Return, and Portfolio Theory (Booth: Introduction to Corporate Finance, 4th ed)
2 Nov 2016
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Ex post return - past or historical return. Ex ante return - future or expected return. Investors can measure these returns with income yield and capital gain/loss yield. Income yield - return earned in form of periodic cash flow received by investors. These cash flows are interest payments (typically in the form of coupons) from bonds and dividends from equities. Measures these cash receipts by dividing them by the purchase price or the beginning-of-period market price. Cf 1 = expected cash flows to be received. P 0 = purchase price (or beginning market price) Dividend yield is cash that investors can expect to earn if the dividend payments over. Measure of the current dividend payments divided by the current value of index. Capital gain - appreciation in price of asset from some starting price, usually purchase price or price at start of year.
