The most common method of performance calculation used in the investment industry is the Modified Dietz Method
Modified-Dietz Method
r(T) = {MV(T)-MV(0)-sum[C(t)]}/{MV(0)+sum[w(t)*C(t)]}
r(T)... Modified Dietz Return
MV(T)... Ending market value
MV(0)... Beginning market value
C(t)... Net contribution occurring on day t
w(t)... weight of the net contribution on day t... w(i) = {T - t} / T
T... Total number of days
t... day the net contribution occurs
The Modified Dietz method assumes that net contributions are invested at the end of the respective day they occur.
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