If the investor (client) has complete control over contributions and withdrawals of funds to and from the portfolio, the most appropriate measure of portfolio return is:
Answer: A
If the investor has complete control over the flow of funds into and out of her investment account, the time-weighted ROR would be the most appropriate performance measure.
Thought it was money wieghted
I think the way the question is phrased could be misleading.
I assume the question is aked from the perspective of the portfolio manager who in this case has no discretionary control over the cash-flows he is managing. From his perspective TWR return would be the most fair performance measure.
Money-weighted return is appropriate if and only if the portfolio manager has discretion about the cash flows into and out of the account; otherwise, time-weighted return is appropriate.
The question is tricky because it says “the investor (client)” has the control of cash flows, so the manager has No control over them. Remember that Time or Money weighted rates are used from the manager perspective, therefore in this case the correct answer would be the time-weighted one.
Regards