could you please confirm whether this is an error in CFA curriculum?
According to my understanding, modified Dietz method only adjusts external cashflows. However, in this example, dividend, which apparently an internal cash flow, has been added back to the initial value. Thus, I think this example is an error made by the Institute. Let me know what you guys think, thanks!
@S2000magician Any ideas? Thanks.
Any help please? I have been bothered by this one for a while. Thanks.
I think you can check the CFA program errata updates. Chances are that someone else might have been in the same situation as you sometime ago, and this may have been resolved in the most recent errata update.
Thank you Chuka. No, this issue has not been addressed in the curriculum errata. That’s why I am asking here.
I think the focus is on cash flows the manager cannot control. Since they can’t control dividends, they are included in the formula. Also the box says “any” cash flow so this is most likely why they are included.
Thank you very much. I think the Modified Dietz method only adjusts external cash flows. And the definition is as follows, that’s why I believe dividends should not be included in the formula and this example is in error.