The Mathematics of Portfolio Return: Simple Return, Money-Weighted Return and Time-Weighted Return
Roman R.
Whether we manage our own investment assets or choose to hire others to manage the assets on our behalf we are keen to know how well our […] portfolio of assets is performing1 and the calculation of portfolio return is the first step in [that] performance measurement process1. Now, while the matter of measuring the rate of return of [a portfolio] appears, on the surface, to be simple enough2, the presence of external cash flows - either contributions to the portfolio or withdrawals from the port