What is it call asset's return :Dividend?spread between price at which one buy it, and it's current value ?Thanks

QuoteOriginally posted by: guillaume07What is it call asset's return :Dividend?spread between price at which one buy it, and it's current value ?ThanksIt's both:if P(t) is the price at time t, the return on time t (r(t)) is given by:r(t)=( P(t)-P(t-1) )/P(t-1) + Div(t-1)/P(t-1)Thats the arithmetic version of returns. There is also the logarithm version, which is easier to work:r(t)=ln(P(t)/P(t-1)) + ln(Div(t-1)/P(t-1))The arithmetic gives a "easy to understand" return, since is just the percentage of $$ gain or lost.The logarithmic version is easier to work since the accumulated value is just it's sum (for the arithmetic it is the cumulative product). Also, a additional argument, is that the log version can isolated the % trading cost of an trade in the return equation, which is not possible in the arithmetic ver.Another argument that I've seen is that the log version can better replicate a normal distribution, which is a premise behind some models in finance. Usually, what is done is to make all the research with log version and then, if desirable, just transform it to arithmetic when presenting the results.