The holding period return and geometric mean return calculations will yield the same result for holding periods longer than two years.

Question

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The holding period return (HPR) calculates the total return of an investment over a specific period, while the geometric mean return (also known as the geometric average return) calculates the average rate of return per period compounded over multiple periods. They can yield different results because the geometric mean accounts for the compounding effect over time, which becomes more pronounced over longer periods, whereas the HPR does not specifically account for the compounding within the period it measures.

The Holding Period Return and Geometric Mean Return Calculations Will