IRR, Money-weighted Return, Time-weighted Return, and the Modified Dietz Method

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A rate of return from which the effects of unsolicited changes in capital are removed is usually called a time-weighted rate of return (TWRR), in contrast with money-weighted rate of return (MWRR) where such effects are not suppressed.  MWRR is sometimes identified with internal rate of return (IRR); the author suggest that MWRR and IRR should not be identified with each other.

Author: John Kahila, Thompson Corporation

A rate of return from which the effects of unsolicited changes in capital are removed is usually called a time-weighted rate of return (TWRR), in contrast with money-weighted rate of return (MWRR) where such effects are not suppressed.  MWRR is sometimes identified with internal rate of return (IRR); the author suggest that MWRR and IRR should not be identified with each other.

 

IRR, Money-weighted Return, Time-weighted Return, and the Modified Dietz Method

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