Simple rate of return

(redirected from Unadjusted Return)

Simple rate of return

The return from investments figured by dividing income plus capital gains by the amount of capital invested. The effect of compounding is not taken into account.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Simple Rate of Return

An estimate of the return on an investment. It is calculated simply by finding the investment's profit before taxes and interest expenses. The simple rate of return is easy to calculate but is not always accurate because it considers the investment's profit rather than cash flow. It also does not take into account the effects of compounding. It is also called the accounting rate of return or the book value method.
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(ii) buy-and-hold adjusted returns: the abnormal returns are obtained by deducting the market return from the unadjusted return; and
(i) buy-and-hold unadjusted returns: the investor holds the stock for the chosen observation period;
For a given sample firm in the inclusion and deletion samples, the unadjusted return is the raw cost of equity measured over the window.
The unadjusted return is calculated as the closing price on the first day of listing less the offer price, as a percentage of the offer price.
(16.) The unadjusted return is 45.5% for GOC IPOs between 1979 and 1987, 45.1% for 13 GOC IPOs between 1981 and 1987, 41.36% for 40 GOC IPOs between 1981 and 1991, 37.3% for 12 GOC IPOs between 1980 and 1988, 27.4% including the value of vouchers in the calculation of the return, 17.7% for 42 GOC IPOs between 1979 and 1996 and 36.3% for 39 GOC IPOs between 1981 and 1996.
Table 3 provides the cross-section/time series results for three measures of return - unadjusted returns (U), returns adjusted by the Sharpe Index (S), and returns adjusted by the Treynor Index (T).
No relationship is found between asset size and either adjusted or unadjusted returns. This result contrasts with Chen et al.