On P.285 of CFAI Text Vol 6, TTWR is introduced and it is stated that geometric linking is required by GIPS. However, on P.294~296, the returns are calculated by Modified Dietz (e.g., 0.51% of portfolio A is calculated by Modified Dietz as on P.286 & EOC Q9/31/34). Shall we use TTWR or Modified Dietz ? TTWR is required from 2011/1/1 ?

both are acceptable

goodman2011 Wrote: ------------------------------------------------------- > both are acceptable Then why TTWR is not used in the example on P.294~296 and EOC Q9/31/34 ?

you can check the book by yourself , both time weighted and approximate time weighted are acceptable

correct you can chose any form daily weighted calculation

In 2nd paragraph on P.185, it is stated : Assuming the input data are valid, the intraperiod valuation method (TTWR) illustrated above gives TRULY ACCURATE TOTAL RETURN. Accordingly, for period beginning on or after 2010/1/1, the GIPS “require” firms to calculate returns by geometric linking periodic returns before and after LARGE cash flows and, as we saw when reviewing the provisions related to input data, the Standards recommend that portfolios be valued on the date of all external cash flows. FOR EARLIER PERIODS, estimation methods (Modified Dietz ?) can be used. My question : 1. Is TTWR required only for LARGE cash flows after 2010/1/1. 2. Are the cash flows in example on P.286 & EOC Q9/31/34 assumed to be not LARGE ? 3. If no indication of the cash flows as LARGE, can we assume they are not LARGE ? as in example on P.286 & EOC Q9/31/34.

Text reads " …approximation methods such as Modified Dietz and Modified IRR will not meet the GIPS standard for period after 1 Jan 2010, when firms will be required to value portfolios on the date of all large external cash flows." My understanding is use TTWR for cases after 1/1/10. To facilitate use of TTWR firms are required to value portfolio on dates of large external cash flow. If cash flows are not large, firms would not have valued their portfolio on those dates, so we can conveniently ignore the ‘not-large’ cash flows. But not to use Modified Dietz unless specified.

hdave5, Do you mean that use TTWR for any case after 1/1/10, whether there are indications that the cash flows are Large or not ? I am confused because CFAI Text still use Modified Dietz in their example on P.286 and EOC Q9/31/34. Anyone else can confirm ?

That is because the question expressly says “using Modified Dietz formula” or the question is related portfolio which is valued in 2007.

hdave5 Wrote: ------------------------------------------------------- > That is because the question expressly says “using > Modified Dietz formula” or the question is related > portfolio which is valued in 2007. Thanks a lot for your response ! For example on P.286 and EOC Q9/31/34, explicitly calcualtions using Modified Dietz formula are required. This makes sense. The remaining question is "Shall we use TTWR for any case after 1/1/10 if calcualtions using Modified Dietz formula are not explicitly required, whether there are indications that the cash flows are Large or not ? BTW, what is the method used in EOC Q32 (this is also used in calculating the “Capital Employeed” in real estate) ? It is different from equation (6) of MIRR on P.286 and equation (5) of MWR on P.131.

Sorry. the method used in EOC Q32 (also used in calculating the “Capital Employeed” in real estate) shall be Modified Dietz formula.