Modified Dietz method: Difference between revisions

Revision as of 03:37, 28 October 2017

Revision as of 04:14, 30 October 2017

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|quote=A slightly improved version of this method is the day-weighted, or modified Dietz, method. This method adjusts the cash flow by a factor that corresponds to the amount of time between the cash flow and the beginning of the period.}}</ref> The original idea behind the work of Peter Dietz was to find a quicker, less computer-intensive way of calculating an IRR as the iterative approach using the then quite slow computers that were available was taking a significant amount of time; the research was produced for BAI, Bank Administration institute.{{Citation needed|date=October 2017}}

His approximation was therefore to generate money weighted rates of return for the period.  Because there is a GIPS requirement to produce a valuation on a monthly basis at least, using modified Dietz with monthly valuations provides a series of individual monthly money-weighted rates with which can be compounded together to produce a good quality approximation for the longer time period time weighted rate of return 

==Formula==

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==See also==

* [[Accounting rate of return]]

* [[Capital budgeting]]

* [[Internal rate of return]]

* [[Rate of return]]

* [[Simple Dietz method]]

* [[Time-weighted return]]

==References==

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==Further reading==

* Carl Bacon. ''Practical Portfolio Performance Measurement and Attribution.'' West Sussex: Wiley, 2003. {{ISBN|0-470-85679-3}}

* Bruce J. Feibel. ''Investment Performance Measurement.'' New York: Wiley, 2003. {{ISBN|0-471-26849-6}}

* Christopherson, Jon A. et al. ''Portfolio Performance Measurement and Benchmarking.'' McGraw-Hill, 2009. {{ISBN|9780071496650}}

[[Category:Finance theories]]