hayjaykay:

Hypothetical: this company issued a 2:1 stock split between your P0 and P1 date, causing the price to change simply based on account of shares outstanding. Your simple formula is then fundamentally incorrect. Also if they pay dividends on P0+ 1day  vs P0+ 364day, this would be the same return?


if there's a stock split you multiply the share price by the shares you hold after the split and it's just basic finance understanding. The dividend date also does not have any relevance as to TSR. Only depends on the investment horizon.

 
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Sure in theory on a finance quiz this works but in reality when you are asked to benchmark TSR for 10-20+ peers over a 5 year period for a fairness or a BoD proposed executive compensation package with today's tools available no one would expect the analyst to follow the splits for each peer. Lets not even go into the complexities associated with stock mergers or other stock-based transactions during the requested duration.

Your second point is incorrect most of the time as TSRs typically assume dividends are reinvested into the shares and has a compounding effect depending on stock movement which does relate to the dividend date.

 

Team can we please assume dividends grow by s&p rate and footnote assume dividends reinvested into s&p (but excludes dividends on reinvested dividends for simplicity)?

tks

 

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