each monthly HPR - each 30 day T-bill return = each excess HPR
your time horizon is 10 years + 1 month = 121 months
string together and multiply 1 + all the excess HPRs aka eHPR...e.g. (1 + eHPR1)(1 + eHPR2)...(1 + eHPR121) = 1 + tthHPR, where "tth" = total time horizon;
subtract 1 to get the decimal form of the total time horizon excess HPR
you could stop at that point, or you could determine the annual compound excess HPR...
121 months is 121/12 = 10.08333 years
so: [(1 + tthHPR)^(1 / 10.08333)] - 1 = annual equivalent compound excess HPR for the 121 month time horizon
...that's a lot of cipherin'
A set of data contains the monthly closing prices for total return (TR) indices for 6 stocks and the S&P/TSX Composite Index for the period November 2000 through November 2010. The TR Indices, for both the single stocks and TSX index, are simply re-statements of price/dividend data and allow for easy computation of monthly HPRs without adding in dividends and worrying about stock splits - it was already built it into the TR Index price. The data set also provided are monthly holding period returns (not a total return index) for 30-day T-bills for each month in the given time series.
With the data calculate the excess HPR.
Could you please clarify what this means?
How would you go about calculating the excess HPR?
