I've recently started reading some books on asset allocation and portfolio theory but I don't work in the field and don't have much knowledge yet.
So I've been reading up on mean-variance analysis and my question is regarding the computation of the expected returns for a particular asset. From what I understand historical data is used to predict future returns. In the book that I'm currently reading, the author provides monthly returns for a particular stock and then we're asked to calculate the expected return for future months.
My question is this, if i have historical open/close data for a particular stock, how do I use this information to calculate the returns? Since the return is based on the share price when the stock was purchased and the price when the it was sold, I'm not sure exactly what the calculation would look like.