Modified Dietz method: Difference between revisions

Revision as of 03:35, 14 November 2020

Revision as of 03:39, 14 November 2020

Line 123:

==Money-weighted return==

The Modified Dietz return is money-weighted, (as opposed to [[time -weighted return|time-weighted]]). If the Modified Dietz return earned on a portfolio with average capital <math>A_1</math> over a holding period is <math>R_1</math>, the average capital over the same holding period on second portfolio is <math>A_2</math>, and the Modified Dietz return earned on the second portfolio is <math>R_2</math>, then the Modified Dietz return earned on the combined portfolio, including both these portfolios, is the weighted average Modified Dietz return:

:<math>W_1 R_1 + W_2 R_2</math>

where