Any easy way to calculate the asset-weighted composite return?
R(BMV)=sum(wi*Ri), wi is the weight of portfolio i.
R(MDietz)=[V1-V0-sum(CFi)]/[V0+sum(wi*CFi)], where the denominator is given.
I used Modified Dietz method and got R=2.597%, not too bad.作者: Zestt 时间: 2011-7-11 19:05
Let me ask this question in a different way.
In Schweser Notes, Aggregate Return Method("Modified Dietz") is an acceptable method to calculate asset-weighted composite return.
Have you seen this in other study materials? Thanks.作者: bkballa 时间: 2011-7-11 19:05
Aggregate Return Method is the same as your method :
R(MDietz)=[V1-V0-sum(CFi)]/[V0+sum(wi*CFi)]作者: ll11 时间: 2011-7-11 19:05
Yes, Aggregate Return Method=Modified Dietz method, and it's Schweser's third method to calculate composite return.
And I just found out that Modified Dietz method is a valid method to calculate composite return on CFAI V6/P296.
So we have three methods:
1) asset-weighting using beginning-of-period values
2) asset-weighting using both beginning-of-period values and EXTERNAL CASH FLOWS.
3) modified dietz method (composite as one portfolio).
I think method 2(BMV+CF) and Modified Dietz method are different. Why do I see the same return=0.62% on page 296?!
Thanks in advance.作者: bboo 时间: 2011-7-11 19:05
bpdulog, that's for portfolio return.
I was asking about the composite return.作者: NakedPuts2011 时间: 2011-7-11 19:05
I'm not sure I follow ur question. This question is pretty straight forward. Determine the weights of the A B and C portfolios. Calculate the returns of A B and C. You know they want you to use the Modified Dietz method because they say to calculate the returns using daily weighted external cash flows.
Weight the portfolios, calculate the respective MD returns and sum them up. No?
