To evaluate the investment merits, you need to measure the rate of return and assess the performance. Start here for a quick overview of the site

Index levels are calculated based on an initial value of 100 on December 29, 1972. In the case of a value-weighted index, the amount of outstanding shares comes into play. Time-Weighted Return Example.

Featured on Meta \(TWRR=\\\sqrt[T]{(1+HPR_1)\times{...}\times(1+HPR_T)}\\-1\)An investor purchased 10 shares of a technological company for USD 50 each.

I got a short question regarding calculating the value-weighted return of portfolios. Quantitative Finance Stack Exchange works best with JavaScript enabled

The data for market value at the beginning of the year seem correct for each company and each year. Learn more about hiring developers or posting ads with us The return for the constructed portfolio is calculated as: the closing price on 28.2 divided by the closing price on 31.1 (as it is also the opening price on 1.2).

Nope. Best, Xinjiao. At the end of the second year, he sold the remaining 6 shares for USD 60 each.

Detailed answers to any questions you might have
Market value will be use as a weight for the return.

  Since I estimate the market model at weekly frequencies, I wonder what should be used as the weighted value?

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By clicking “Post Your Answer”, you agree to our To subscribe to this RSS feed, copy and paste this URL into your RSS reader. Is that a rule? Therefore, we should conclude that if an investment manager has Here are things that you should remember/know about on your exam:Required Disclaimer: CFA Institute does not endorse, promote or warrant the accuracy or quality of Soleadea. Example 1: Money-Weighted Return Question .

Is it OK to use fiscal-year end or calender-year end market capitalization, or to use each week-end market capitalization? The investor decided not to reinvest the dividends.

We're going to use the Cash Flow and IRR spreadsheets.The time-weighted rate of return differs from the money-weighted rate of return as it does not depend on the value of particular cash flows.

Depending on numbers it could be the other way round. Market-capitalization on the day of portfolio construction or the last day of the month in which I calculate the monthly return?You'd use MC-weight calculated on 1/31 applied to the return for Feb (1/31 - 2/28) as these are the weights you'd have at portfolio inception.

site design / logo © 2020 Stack Exchange Inc; user contributions licensed under What is the money-weighted rate of return on this 2-year investment?We can compute this rate of return using a calculator. If a security is dropped mid-year, its last available month-end return is used. When you put your money to work, sooner or later you simply want to know how successful the investment has turned out to be. The investor decided not to reinvest the dividends. Annualize the return . The table below describes the market value of a certain portfolio at different dates: We also learn that the client made a $12,000 withdrawal on March 3, 2012 and a $20,000 deposit on December 20, 2012. Which market-capitalization do I chose to weight the individual returns of the companies? Stack Exchange network consists of 176 Q&A communities including So, logically the values of particular cash flows affect the value of the money-weighted rate of return. Thank you.

Rebalancing this type of index is simple. don't you mean the portfolio return at time $t=T$ is $\frac{P_T}{P_0}-1$ where $t=0$ is the date of portfolio construction and $T$ is the performance measurement date (one month after construction)?While your argument makes obviously sense, I'm not 100% convinced. Over time, these indexes can significantly outperform active managers, market cap-weighted indexes, equally-weighted indexes, and fundamentally-weighted indexes. Example: The portfolio is constructed based on the value of a certain criteria on date 31.1 (Jan 31st). This systematic flaw appears to cost market cap-weighted indexes approximately 2% per year in return over long periods. As there is no initial investment (expect maybe the day of the IPO but it doesn't make sense) this is not applicable to them, therefore they probably use something else (probably the market cap for that day/month/period). After a year, he received a per-share dividend of USD 7 and sold 4 shares for USD 55 each. Thanks for contributing an answer to Quantitative Finance Stack Exchange! I need to estimate a type of market model and one of the variable needed is INDRET, value-weighted industry returns.


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