Modern Finance TimeWeightedReturn

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TimeWeightedReturn

Returns sub-period returns linked by compounding, ignoring when money moved in or out.

Syntax

TimeWeightedReturn( subPeriodReturns( ) )

Examples

#import "std/money"
using money

'' Geometric linking of sub-period returns -- it measures the MANAGER,
'' because it removes the effect of when money was added or withdrawn.
''
'' IT IS A TRUE TWR ONLY IF you cut a sub-period at EVERY external flow.
'' Pass monthly returns with mid-month contributions and you get a
'' plausible number that is not a TWR.
dim as float64 r( 0 to 11 ) = { 0.02, -0.01, 0.03, 0.015, -0.025, 0.04, _
                               0.01, -0.005, 0.02, 0.03, -0.015, 0.025 }
dim as float64 b( 0 to 11 ) = { 0.018, -0.012, 0.025, 0.012, -0.02, 0.035, _
                               0.008, -0.004, 0.018, 0.028, -0.012, 0.022 }

print TimeWeightedReturn( r( ) ).Value( )                '' 0.1410864155548182

'' MULTIPLICATIVE, not additive: a 50% gain then a 50% loss is -25%, not
'' zero, which is the classic result and a good check on the linking.
dim as float64 gl( 0 to 1 ) = { 0.5, -0.5 }
print TimeWeightedReturn( gl( ) ).Value( )               '' -0.25

'' A total loss is -100%; anything worse is refused.
dim as float64 wipe( 0 to 1 ) = { -1.0, 0.1 }
print TimeWeightedReturn( wipe( ) ).Failure( ).Message( )

---

Library: Finance
Category: Finance
Documented under: Nothing Becomes A Keyword
Source: pkg/std/money/finport.tiko in the tiko repository.