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How to calculate MWRR and TWRR？

幫考網校2020-10-13 16:53:31
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MWRR (Modified Dietz Method Weighted Rate of Return) and TWRR (Time-Weighted Rate of Return) are two methods used to calculate the rate of return on an investment portfolio. Here are the steps to calculate these two methods:

MWRR:

Step 1: Calculate the cash flows for the period. This includes all the cash inflows and outflows during the period.

Step 2: Calculate the weighted average time of the cash flows. This is the average time between the cash inflows and outflows.

Step 3: Calculate the change in the market value of the portfolio during the period.

Step 4: Calculate the MWRR using the following formula:

MWRR = (Ending Market Value - Beginning Market Value - Cash Flows) / (Beginning Market Value + (Weighted Average Cash Flows / 2))

TWRR:

Step 1: Calculate the market value of the portfolio at the beginning of the period.

Step 2: Calculate the market value of the portfolio at the end of the period.

Step 3: Calculate the time-weighted return for each sub-period by dividing the ending market value by the beginning market value and subtracting 1.

Step 4: Calculate the geometric average of the sub-period returns.

Step 5: Calculate the TWRR using the following formula:

TWRR = (1 + Geometric Average of Sub-Period Returns) ^ (365 / Number of Days) - 1

Note: The number of days can be adjusted depending on the time period being measured (e.g. 365 for a year, 90 for a quarter, etc.).
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