Real rate of return

(redirected from Inflation-Adjusted Returns)

Real rate of return

The percentage return on some investments that has been adjusted for inflation.

Real Rate of Return

The rate of return on an investment after adjusting for inflation. It is calculated simply by taking the gross return and subtracting the inflation rate. For example, if the return on an investment is 7% and the inflation rate is 4%, the real rate of return is 3%.

Real rate of return.

You find the real rate of return on an investment by subtracting the rate of inflation from the nominal, or named, rate of return.

For example, if you have a return of 6% on a bond in a period when inflation is averaging 2%, your real rate of return is 4%. But if inflation were 4%, your real rate of return would be only 2%.

Finding real rate of return is generally a calculation you have to do on your own. It isn't provided in annual reports, prospectuses, or other publications that report investment performance.

References in periodicals archive ?
As developed market interest rates stall or fall and the inflation-adjusted returns on most sovereign debt drops to negative territory once again -- the global search for yield by institutional investors is as urgent as it has ever been.
However, on a long-term basis these tend to deliver low or negative inflation-adjusted returns. While it is important to have bank deposits, the overall proportion has to be balanced out between other investment options.
The top line represents the absolute rupee-denominated 10-year returns, the middle one the dollar-denominated 10-year returns, and the bottom one the rupee-denominated inflation-adjusted returns. The fact that the line has not veered into negative territory since 2004 suggests that stocks, in the long run, are a profitable enterprise, or at least not a money-losing one.
Between 1815 and 1973, average inflation-adjusted returns were 6.4 percent and haircuts averaged 1.3 percent.
But this doesnaACAOt mean that you should totally turn a blind eye to equities because they have the potential to yield inflation-adjusted returns in the long run.
Real return: The inflation-adjusted returns of an investment.
The first of these concerned the UK equity markets and returns to shareholders: the annual inflation-adjusted returns on British pension funds in 2000-09 averaged only 1.1 per cent when the financial sector was taking for itself some 40 per cent of all corporate profits-while bankers were paying themselves huge bonuses.
Using these inflation-adjusted returns, we find that there is still substantial evidence of excess return predictability in liquidity-adjusted inflation-indexed bond returns as well as in breakeven inflation returns in both the US and the UK, which we interpret as evidence of a time-varying real interest risk premium and a time-varying inflation risk premium.
Tushar Pradhan, chief investment officer, HSBC Global Asset Management, says the rising dollar pushed up US 10-year Treasury yield from 2.1% to 2.5% within a month, offering better inflation-adjusted returns than most emerging markets.
He said going back to 1960, the first 7 months of the third year of a presidential cycle (like 2011) produced inflation-adjusted returns of 20 percent for the 48-month presidential cycles.<span style="mso-spacerun: yes;"> </span>Meanwhile, the remaining 41 months of the cycle returned only 1 percent.
In contrast to most studies, which employ statistical techniques to test the correlation between inflation and stock returns, this study uses two investment strategies--lump-sum and annuity--to investigate actual inflation-adjusted returns among the ten African stock markets.
Real, inflation-adjusted returns over the period are fairly high in China--between 5 percent and 10 percent--and quite low in Japan--ranging from zero to about 3 percent.