ABSTRACT
This chapter introduces some basic concepts of finance and the types of financial data. It focuses on the returns on an asset, which are the proportional changes in the price of the asset over a given time interval, typically a day or month. The return on the asset is simply the proportional change in its price over a given time period; the return is positive if the price increased and is negative if the price decreased. One advantage of working with log-returns is that it simplifies the analysis of multi-period returns. The multi-period return when there are dividends is based on several sources: the price increase of the original investment, the dividends, and the price increase of the shares purchased by the dividends. Adjusted stock prices are generally adjusted for stock splits as well as for dividends. The chapter presents the results for the returns on Wal-Mart stock return data.
