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How does the expected rate of return differ from the holding period return?

How does the expected rate of return differ from the holding period return?

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The holding period return is the return earned on the investment over the holding period (invetsment horizon). It is a combination of capital appreciation and dividend/interest income. This return mainly reflects the past performance.

The expected return is equal to the probability-weighted average of the returns earned on an investment. It focusses on a potential reeturn (one that is no certain) over a future investment period (which is yet to occur). Thus, this return is forward looking.

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