Time weighted vs money weigthed

CFA Level I
#1

I have difficulties with these two, which one is the IRR ? Any tips to calculate them or at least to not confound them ?

Thanks

#2

time weighted -----> geometric. Tips: calculate return for each period, then find the geometric return.

money weighted -------> IRR. Tips: money out = money in.

#3

Thanks Than ! But which one you have to take the amount at the beginning of the year for the end of previous year calculation ?

#4

Lets make an example. at t=0, you buy 2 stocks @100; t=1, you receive dividend of 0.5/share, and you purchase 5 stocks at 150$/share. t=2, you sell all the stocks at 200$ and receive no dividend.

Time weighted.

for t=1. r = 0.505

t=2. r = 0.333

geometric r= ((1.505*1.333)^0.5)-1= 0.41639

Money weighted

money out = money in

200+(750/r)= (1/r)+(1400/r^2)

CFo=200; CF1=749; CF2=-1400

–> IRR = 36.88%