Time-Weighted Returns vs Money-Weighted Returns?

Q&A
1

Hi,

Looking forward to your response on this.

Have to admit I am not sure how the various performance numbers are crunched by SC. Might be good to get some clarity…

2

Time-weight Returns

Definition by Investopedia

Essentially, it removes the cash-flow influence in the computation.

Mathematically, Time-Weighted Rate of Return = [(1 + HPR1) * (1 + HPR2)… * (1 + HPRN)] - 1 where

  • N = Number of sub-periods
  • HPR = (End Value - Initial Value + Cash Flow) / (Initial Value + Cash Flow)
  • HPRN = Return for sub-period N

In StocksCafe, the sub-period used are daily returns.

3

Hi evan, recently compared the performance of STI ETF (ES3.SI) on StocksCafe to what I pulled from Bloomberg - there was a 2-3% discrepancy over the long term. Wanted to check if TWR returns reported by StocksCafe are based on reinvested dividends?

4

Hi,

Wanted to check if TWR returns reported by StocksCafe are based on reinvested dividends?

If you mean considering the dividends, then yes. If you mean assuming the dividends are reinvested, then no.

Cheers,
Evan

5

Thanks Evan!

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