The evaluation of the portfolio performance is usually computed using the Modified Dietz approach. We propose an alternative approach. In our model, the average capital invested (ACI) is no more the sum of the cash flows time-adjusted, but it is the weighted average of the capital invested in each subperiod, using weights given by the length of the subperiod in which the capital is invested. This approach is able to provide a reasonable rate of return even with large volatility of periodical cash flows
A modification of the modified Dietz approach
CUCURACHI, PAOLO ANTONIO;POMANTE, UGO
2013
Abstract
The evaluation of the portfolio performance is usually computed using the Modified Dietz approach. We propose an alternative approach. In our model, the average capital invested (ACI) is no more the sum of the cash flows time-adjusted, but it is the weighted average of the capital invested in each subperiod, using weights given by the length of the subperiod in which the capital is invested. This approach is able to provide a reasonable rate of return even with large volatility of periodical cash flows
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