Expected Rate of Return of Investments with Uncertain Timing

Description

Expected Rate of Return of Investments with Uncertain Timing
Boris Klebanov, Ph.D.

We develop a systematic approach to studying rates of return of investments in situations where exact timing of transactions is not known. The approach is based on extending the Modified Dietz rate of return. We introduce a concept of the E-rate, which is the expected value of a random rate of return of investments whose cash flow timings are described by a probability distribution.