Over time,holding period returns tend to overstate the true rate of return.

Question

Quizplus · Accepted Answer

This is because holding period returns do not take into account the effect of reinvested dividends or other distributions that are received during the holding period. Additionally, holding period returns do not account for the impact of taxes or inflation on the investment. Therefore, the true rate of return may be lower than the reported holding period return.

Over Time,holding Period Returns Tend to Overstate the True Rate