Price return and total return are two different ways to measure the performance of stocks, bonds, and ETFs. Here are the key differences:
Price Return
- Price return, also known as capital return, only considers the change in the asset’s price or market value over a specific period.
- It does not take into account income generated from the asset, such as dividends for stocks or coupon payments for bonds.
- Price return is a simple measure of how the market value of the asset has changed, excluding any income received.
Total Return
- Total return includes not only the price appreciation of the asset but also any income generated from it, such as dividends, interest, or distributions.
- It provides a more comprehensive view of an investment’s performance as it accounts for all sources of return.
- Total return is often considered a more accurate measure of an investment’s true profitability.
What data should I be using?
Generally, technical analysts use Price Return data because those are the prices at which the stocks actually traded (ignoring stock splits!). Total Return data changes the historical prices to take into account the extra income from the dividend or interest payments. By default, the charts in Optuma are Price Returns, but - if using our end-of-day data - it’s possible to display the Total Return data by clicking on the chart header:
Here’s an example showing the difference with IBM. The Price Return in black has been overlaid with the Total Return chart (green):
As you can see, the further back you go the bigger the disparity between the lines because more dividends have been paid so the more the historical prices drop. Recent prices will converge, and will be the same since the last payout.
On a price return basis IBM is currently at $147, way below its 2013 all-time high of $205, but when the dividend payouts are included the equivalent price at that time was $130. This means that if you bought (and held!) IBM back then and received all the dividends you would be up about $17 per share - although I’m not sure how many of you would have held on until the 2016 low!
Note
In the new testers currently in development, we will be calculating performance using total returns (when the data is available). This way the testers factor in dividends into the strategy results.
Comparing historical returns
It’s possible to compare the total returns in Optuma’s watchlists. Below are two identical lists with the same column formulas. By changing the Price Adjustment property in the bottom watchlist to Total Returns, all the column calculations will use the historically adjusted data. So BHP on the ASX has gained 22% over the last two years when taking into account dividends, versus only 18.8% on a price return basis. The other examples are for a Fidelity US Mutual fund, a stock, and a bond ETF:
Note
If you are unable to see any difference between price and return charts the most efficient way to ensure that the historical adjustment factors have been downloaded would be to download the full exchange history again under ( Data > Exchange ) menu.
In summary, price return focuses solely on changes in the market price of an asset, while total return provides a measure of the returns you would have achieved from holding the security by considering both price changes and income generated by the asset, giving a more accurate representation of an investor’s actual gains or losses.
Senior Software Specialist at Optuma
Darren is the senior Software Specialist at Optuma based in Brisbane, Australia. Darren grew up in the UK and attended college in the USA where he earned a BA in Economics from St Mary’s College of Maryland. He went on to spend a few years working at the Nasdaq Stock Market in Washington DC. Darren joined Optuma in 2009 after attending an introductory technical analysis course that used the software.
FAQs
In summary, price return focuses solely on changes in the market price of an asset, while total return provides a measure of the returns you would have achieved from holding the security by considering both price changes and income generated by the asset, giving a more accurate representation of an investor's actual ...
What is the difference between price and total return level? ›
Unlike its counterpart Total Return Price, Total Return Level will match at the start of the history because dividends are adjusted from the beginning. For Total Return Price, prices match at the end of the history as it is calculated looking backwards.
What is the difference between return and total return? ›
The return on an investment usually involves two elements: the capital (or price) return, and the income return. The sum of both the capital and income return is then called the “total” return.
What is the difference between price performance and total returns? ›
A price return index only considers price movements (capital gains or losses) of the securities that make up the index, while a total return index includes dividends, interest, rights offerings and other distributions realized over a given period of time.
What is the difference between price return and total return swap? ›
The price return typically captures the capital gain or loss without coupons or dividends. By comparison, the total return captures both the capital gains and the income generated from coupons and dividends.
How do you calculate the price return? ›
The Price Return is the change in price over a specific period of time displayed as a percentage. For example, if a person bought Stock A 1 year ago for $10 and it is currently selling at $15, it's period return is ($15/$10)-1 = 50%.
What is the difference between NR and TR in S&P 500? ›
NR - means Net Return. Net Return indices include dividends after the deduction of withholding taxes. TR - means Total Return.
What is an example of a total return? ›
Understanding Total Return
The total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond), or capital gains (if a fund).
What is the total return price? ›
The Total Return is the change in price over a specific period of time that includes dividends and distributions paid but less the expense ratio.
What does total return include? ›
Total return includes interest, capital gains, dividends, and distributions realized over a given period of time. In other words, the total return on an investment or a portfolio includes both income and appreciation. The total return can include the dividend-adjusted return.
First, for average investors, return of an asset is a complete and scale-free summary of the investment opportunity. Second, return series are easier to handle than price series because the former have more attractive statistical properties.
What is a total return strategy? ›
Total return is a core-plus strategy designed to seek consistent, attractive returns across all market cycles via a multi-sector approach, while remaining benchmark-aware and retaining the general risk profile of conservative fixed income investments.
What is the difference between price return and NAV return? ›
Funds that experience increased demand for their shares will have higher market-price returns if share prices rise faster than NAVs. Similarly, the market-price return of shares bought at a premium will be lower than the NAV returns if demand for the shares slows despite consistent NAV performance.
What is a total return swap for dummies? ›
Total Return Swaps
This gives the party paying the fixed-rate exposure to the underlying asset—a stock or an index.10 For example, an investor could pay a fixed rate to one party in return for the capital appreciation plus dividend payments of a pool of stocks.
How to price total return swap? ›
coupon rate * adjusted notional * ((val date-reset date)/360). Valuation of TRS is done by subtracting the financing leg from the asset leg if we are long.
Is total return the same as IRR? ›
For monthly data, total return is calculated by geometrically linking the IRR for each interim month. The approximation is used to avoid portfolio re-evaluation whenever there are cash inflow or outflows. Generally speaking, the shorter the sub-sample period, the more accurate the approximation is.
What is the difference between PRI and Tri? ›
The performance of a Price Return Index (PRI) captures only the capital gain or loss and not the coupon or dividend received from the security, whereas a Total Return Index (TRI) captures both.
What does total return price mean? ›
Total return is the actual rate of return of an investment or a pool of investments over a period. Total return includes interest, capital gains, dividends, and realized distributions. Total return is expressed as a percentage of the amount invested.
What does total return mean in real estate? ›
Total returns paint the entire picture of a real estate investment. They will factor in cash flows from the project, the appreciation, the loan paydown, and the gain on your initial investment. As mentioned above, high yields correlate with higher total returns, but it is not a given.
