Why is it that when a contribution happens at the beginning of the month, the amount is added to the begginning market value, whereas when the contributation happens at the end of the month, the amount is subtracted from the ending value? I’m trying to understand the intuition behind this.
The logic here is that a contribution at the beginning of the period is assumed to be invested at t=0 and thus should be apart of the return equation.
A contribution at the end of the period is assumed to be invested the following month (t=1) and therefore is excluded from the return calculation.
THANKS!! makes a lot of sense. wish they added that in the curriculum lol