The formula for the Absolute Dollar-Weighted Return is on page 171 of the ROI manual. The word "absolute" means that that return is not annualized--it is for the return for the entire 22 Month period. It makes sense that a -1.1% annual return compounded for 22 months is about 2% and same for -9.9% compounded to -17.3%.
Note the annualized IRR is the rate that a savings account would have paid to generate the same return for the same cash flows. These dollar-weighted returns take into account the timing of cash inflows and withdrawals. You could call it the investor's return.In contrast, a time-weighted return ignores the timing of cash flows. A report like Security Growth vs. Indexes gives the time-weighted returns. You could call these the manager's returns since they better reflect how the manager invested; ignoring what actions the investor may have taken. See ROI manual pages 173-174
- David
FNI Technical Support
Case #38-10906
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posted 01-23-2009 08:00 AM
