Stock Returns: Definition, Indicators, And How To Calculate It

ACTIVELY SHARE — What is stock return and how is it calculated? Come on, learn about it now!

Do you know what stock returns are? In short, stock returns are the selling price of shares minus the purchase price of shares plus dividends.  Choosing stocks as an investment tool is the right thing for beginners.

However, it should also be noted that choosing stocks must also have basic knowledge so as not to lose.

For those of you who want to start investing in stocks, first understand how to calculate the correct stock return. Let’s see a more detailed explanation from below information.

Understanding Stock Return

Stocks are one of the most popular and frequently used financial market instruments. Stocks can provide very attractive returns. Therefore, many investors are interested and make stocks as one of their investment instruments.

Quoted from the Indonesia Stock Exchange, shares are a sign of capital participation from either a person or a party (business entity) in a company or limited liability company.

In carrying out stock investments, there is such a thing as stock returns.

Simply put, stock return is the level of profit enjoyed by investors. In addition, stock returns are also important for companies and investors.

This is because stock returns are an indicator of a company’s performance, whether it is good or not to invest in the stock market.

As for stock returns, according to experts, based on Corrado and Jodan, stock returns are the gains obtained from investors’ share ownership on their investment activities and consist of dividends and capital gains/losses.

Types of Stock Return

Based on the type, stock returns are divided into 2, namely realized stock returns and expected stock returns. The types of stock returns are as follows.

1. Realized Stock Return

The first type of stock return is realization. Realized stock return is the calculation of the difference in stock prices based on historical company data that has occurred. Realized stock returns use past or historical data in their calculations.

After that, the realized stock returns are further divided into several types, namely total returns, relative returns, cumulative returns, and return adjustments.

2. Expected Stock Return

Expected stock return is an intangible return because it is still in a state of expectation or expectation. Expected stock returns can be realized or not.

To calculate expected stock returns, it can be seen from the value of future expectations, historical returns, and existing expected returns.

Factors Affecting Stock Return Gains

There are 2 factors that influence the return of stock profits, namely macro and micro factors. Here’s the explanation.

1. Macro Factor

Macro factors are divided into two, namely economic and non-economic. Macroeconomic factors that affect stock returns can be inflation, interest rates, foreign exchange rates, economic growth rates, and so on.

Meanwhile, non-economic macro factors are political events, both domestic and international.

2. Micro Factor

The micro factor in question is a condition in which a problem occurs within the company, including financial and non-financial information or data, to fundamental and technical information.

Moving Average Stock Return Indicator

To find out stock returns, there are several indicators to analyze it. The stock return indicators are as follows.

1. Relative Strength Index

First, the stock return indicator is the Relative Strength Index or abbreviated as RSI. RSI is an indicator used to measure the volatility of an asset’s price.

RSI is used to evaluate whether the asset is said to be in an overbought or oversold position.

2. Moving Average Convergence Divergence

Furthermore, the stock return indicator is the Moving Average Convergence Divergence or MACD. This indicator is used for technical analysis that describes the relationship between two moving averages in an asset price trend.

The moving average itself is the average price depicted by a trend line.

3. Stochastic Oscillator

The next indicator is the Stochastic Oscillator. This indicator has a function as a hint of buy and sell signals through two intersecting lines.

This indicator also has a purpose which is to guide the price of the last closing trade by calculating the difference between the lowest and highest prices in a certain period of time.

4. Bollinger Bands

Bollinger Bands is an indicator that is often used by traders. This indicator is used to analyze the price movement of an asset. In addition, this indicator can also be used among crypto asset investors.

How To Calculate Stock Return

Based on the type, the method of calculating stock returns can be divided into 2, namely the realized stock return formula and the expected stock return formula.

The way to calculate stock returns is as follows.

1. Realized Stock Return


Ri,t = Pi,t-1


Ri,t = stock return i at time t

Pi,t = stock price i in period t

Pi,t-1 = stock price i in period t-1

2. Expected Stock Return

E(Rit) = Rmt


E(Rit) = expected stock profit rate on day t

Rmt = market profit rate in period t

In addition to the two formulas above, there are also other ways to calculate stock returns, namely stock returns in the form of capital gains and capital losses. The formula is as follows.

3. Stock Returns in the form of Capital Gain and Capital Loss

Stock return = (selling price – purchase price) + dividend

The return will be said to be profitable if it is positive and is considered a loss if it is negative.

That was a brief explanation of the meaning of stock returns, don’t forget there is also a formula along with how to calculate stock returns for those of you who are just starting to invest in stocks.

Please note that every investment has its own risks, so you need to consider it before doing it. Hopefully useful and don’t forget to check other articles on ACTIVELY SHARE!

That’s the whole information about Stock Return, its definition, example and how to calculate Stock Return, please tell your family, cousins, friends and kin about this information who knows they might need it. See you again in the next posts about Economy, Management, Accounting and Business from ActivelyShare.Com in the future.

Your thoughts

This is the medium for writing YOUR VOICE. Stay polite, constructive, avoid OOT & give us feedback if you think we need it. Please also read our comment policy before commenting.
Write your comment here