What is time-weighted returns? Why is it so different from P&L+Dividend+Closed?

Time-weight Returns

Time-weighted returns -> https://www.investopedia.com/terms/t/time-weightedror.asp

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 are daily returns.


This is simply the absolute returns. As for the computation of the percentage, it is actually debatable what to use for the denominator and I have written an article about it.

Basically, I cannot find the perfect denominator and hence users can set what they prefer to use here.