I’m having some trouble calculating the time weighted return in this example:
Say we have a portfolio of two stocks
Stock A:
December 31, Year 0 Value: 750,000
Withdrawals during year: 120,000
TWR for Stock A Year 1: 5.13%
Stock B: Purchased in Oct 21, Year 1
Oct 21, Year 1 Value: 160,000
TWR for Stock B Year 1: 2.91%
What is our Portfolio TWR?
I understand cash flows do not impact TWR but portfolio weights would, correct? Is there enough info to answer this question? From what I understand, we would need the portfolio value and TWR up until Oct 21 for Stock A and that would be holding period #1, and then we would need to calculate the TWR for Stock A until the end of the year and do the same for Stock B, and then weight those two returns using their respective weights at Oct 21, Year 1. We would then need to multiply that return by the return up until HPR 1. Is that correct?