What are Historical Returns?

Historical returns are a reflection of the performance of a particular security or index in the past. They are used in the development of informed investing decisions where risks and potential returns are balanced to create a portfolio with a probability of strong returns. People can find information about historical returns in financial publications, as well as in the prospectuses issued by companies to provide information about their securities offerings.

Tracking historical returns for a given product on the securities market can provide people with valuable information. They can compare returns to other products to see how they perform during periods of economic uncertainty and industry turmoil. Returns can also be followed to see if they generally trend upward, and to look at boom and bust cycles, a common phenomenon with stock indexes, where the index may wax and wane over time in response to market pressures.

In addition to evaluating historical returns directly, people can also use the data in statistical analysis. A standard deviation analysis looking at how securities perform when compared to the expected standard, as measured by a benchmark, can be beneficial, as can analyses looking at volatility and other matters of concern. Using past returns to find the record low and record high, people can make projections about gain and loss potentials. All of this information can be pulled together to generate projections for the future fortunes of a given security or index.

In disclosures provided to investors, companies must provide information about historical returns. If a company is listed in an index, it may provide data about the index as a frame of reference, although people can also look up historical returns in publications about the index itself. While companies may try to slant information in a positive way to encourage investors, the historical returns data is usually accurate because it is challenging to manipulate; companies cannot lie about publicly stated information, although they may use a variety of techniques to explain the circumstances behind declines in value and sudden volatility.

Charts of past returns are available from a number of resources, including web sites that maintain data about the financial markets. These sites usually have search engines so people can search for specific topics of interest and the data can be sorted in a number of different ways to generate meaningful information for investors. Some offer functions like graphing, allowing people to chart historical returns visually to understand investment situations more thoroughly.