Dietz- still confused

I know this has been asked before, but I still don’t get it. So for the modified Dietz method one is supposed to take into account the time weighted cash flows. okay so far…But why take the time weighted cash flows only in the denominator and not in the numerator? Simple Dietz= (EMV-BMV-CF)/(BMV+0.5CF) Where is the 0.5 in the numerator? Please help!

CF Occurs exactly in the middle of the month , so we use 0.5*CF in the denominator( because the new cash has only half a month to work ) As far as numerator goes , think about it like this: If new cash came in on the 1st of the month , then cash used in that month would be BMV+CF Hence numerator would be EMV-BMV-CF If new c ash came in on the very last day of the month , then cash used is BMV , but the EMV has been inflated by CF ( did not really use CF during the month , so not fair to include it ) Hence numerator would be EMV-BMV-CF. In fact it would be always EMV-BMV-CF , for any day of the month. I think you are , as I was , confusing what EMV and BMV really mean . Simply put BMV and EMV are the amounts WITHOUT the presence of new cash flows. Its just a terminology thing

My strategy for dealing with Dietz is to ignore it and hope it doesn’t appear on the exam. Dietz only appears in L3 GIPS right? I think the Dietz method hasn’t been allowed in GIPS since 2005, and Modified Dietz was disallowed in 2010… Which makes me think that these methods are somewhat-unlikely to be tested.

modified Dietz! I love that guy

Dietz and Confused

Why do they put it into the curriculum for GIPS for 2011 , when it is already disallowed by GIPS standards?

because “they kicking in the front seat” and im “chilling in the back seat”

janakisri Wrote: ------------------------------------------------------- > Why do they put it into the curriculum for GIPS > for 2011 , when it is already disallowed by GIPS > standards? GIPS gets a major overhaul every 5 years or so. But when the GIPS rules change, they don’t expect companies to recalculate all of their historical returns. Hence, GIPS mentions both the rules. A lot of changes happened in GIPS in 2010 (and in 2005), which is why GIPS has many reference to what was allowable before and after certain dates. The CFAI curriculum reflects this. My theory is that CFAI is more likely to test the GIPS rules and methods that are effective today. Of course, there is no guarantee that CFAI won’t go back and ask something from GIPS history.

janakisri, very useful- thanks alot