How would you calculate historical bond returns using bond prices? Would you treat bonds just like shares ?
Thanks
1 Answer
$\begingroup$
$\endgroup$
Returns of all assets are calculated in roughly same way, which boil down to changes in prices and returns due to income (e.g., coupon payments for bonds, dividends for stocks, etc.). The discrete period return of a bond is $$r = \frac{P_\text{end} + AI_\text{end} + \text{coupon payments during period}}{P_\text{beginning} + AI_\text{beginning}} - 1,$$ where $P$ is the clean price and $AI$ is the accrued interest.
