Question

You receive a year-end statement from your broker that details your stock ownership over the years, and the total gain or loss over the holding period for each. You want to devise a method to make a meaningful comparison of the returns in order to determine which stock performed the best and which performed the worst. The problem is, the holding periods all have different starting and ending dates and are different lengths.

Stock returns
Stock   Buy date   Buy price (P0)   Sell date   Sell price (P1)   Total return
((P1-P0)/P0)
A   1/1/2002   16.00   1/1/2016   25.00   56.3%
B   1/1/2014   87.00   1/1/2015   80.00   -8.0%
C   1/1/2008   26.00   1/1/2014   28.00   7.7%
D   1/1/2001   17.50   1/1/2008   23.50   34.3%
E   1/1/2004   76.00   1/1/2007   68.00   -10.5%
F   1/1/2006   12.00   1/1/2016   13.00   8.3%


What is the best way to compare the returns of these stocks?
   Use the return over the entire holding period for each stock to compare
   Using the total return over the holding period for each stock, take the geometric mean to get the one year average return, and compare
   Find the dollar change of each stock (Sell price minus Buy price) and compare
   Using the total return over the holding period for each stock, take the straight average to get the one year average return, and compare

Answer 1

Refer Below screen shot where

a. Geometric Mean of one year Average Return  of Column K derived in yellow colored cells below i.e. G.M= 1.278

b. Dollar change of each stock (Sell price minus Buy price) derived in column H

Interpretation : It shows Return of the Stocks A and D are higher since they have hold for long period of time as compare to other stocks. Also Stock B, E and F are holded for less amount of period hence it has loss or less profit as compare to stock A and D.

c. Average of One year average return are derived using data from Column K . refer Yellow colored cell of Average.

Average= -1.57

Which shows overall return of all stocks is poor.

Stocks A and D are performed best but it took more than 5 years to give good returns.

Stocks B, E and F are poor performer in portfolio which impacted the overall average of returns.