GIPS Verification
Using the modified Dietz method, Hang calculates the October composite return to be _closest_ to:
Incorrect.
The ending assets must be used as the base of the calculation.
Incorrect.
The contributions to the portfolio subtract from the investment performance, while the withdrawals add to the investment performance.
Yes!
Using the modified Dietz formula, the calculation is
$$\displaystyle r_{Mod~Dietz} = \frac{V_1 - V_0 - CF}{V_0 + \sum^{n}_{i=1}(CF_i \times w_i)}$$.
For this calculation,
$$\displaystyle \sum^{n}_{i=1}(CF_i \times w_i)$$
is the sum of each cash flow multiplied by its weight, and
$$\displaystyle w_i = \frac{CD - D_i}{CD}$$,
where $$CD$$ is the total number of calendar days in the period, and $$D_i$$ is the number of calendar days from the beginning of the period to the time cash flow $$CF_i$$ occurs. This leads to a denominator value of:
$$\displaystyle 585.60 + \frac{31-5}{31}(-15.05) + \frac{31-9}{31}(19.82)$$
>$$\displaystyle + \frac{31-15}{31}(16.42)+ \frac{31-24}{31}(-18.96) \approx 591.237 $$
The composite return is therefore
$$\displaystyle r_c = \frac{602.34-585.60 - (-15.05) - 19.82 - 16.42 - (-18.96)}{591.237} \approx 0.0245 = 2.45 \%$$
-7.56%.
1.04%.
2.45%.
