Does anyone know how to figure the TWR for an investment that is not exactly a year long with additional inflows of cash…Not something I need for the test but was wanting to know anyway…example below. Day 1 value = 9,000 Day 180 value = 12,000 add 6,000 on day 180 to equal 18,000 ending value day 250 = 20,000 what would be the TWR for this…also if it was over 1 year what would the calculation be…say change the ending time to 1 yr and 50 days…this would be more of a real world example of finding the true TWR of an investment…
- HPR for first 180 days: (12,000 – 9,000) / 12,000 = 25% HPR for next 70 (250 – 180) days: (20,000 – 18,000) / 20,000 = 10% TWR for the total period of 250 days = (1 + .25)*(1 + .10) -1 = 37.5% Annualized TWR = [(1 + .375) to the power of 1 / (360/250)] - 1 = *** *** I don’t have my calculator handy, so pls calculate yourself. 2) If this period was over 250 days, say 360+50 = 410 days, then annualized TWR would have been [(1 + .375) to the power of 1 / (360/410)] - 1 Hope this helps.
would you not take the geometic mean to the .5 power since there are 2 holding periods and isnt the eay (1+hpy)^365/days-1 not 1/ (360/day)?
I think you only use the geometric mean for multiple years. For a TWR to 250 days, to annualise it you would make it to the power as follows: [(1+r)^365/250]
rus1bus: The formula for HPY is (P1-P0)/P0. By having divided the numerator by 20,000, effectively you are dividing it by your ending period balance= P1 when it should be P0. Please advise.
rus1bus: The formula for HPY is (P1-P0)/P0. By having divided the numerator by 20,000, effectively you are dividing it by your ending period balance= P1 when it should be P0. Please advise.
levista101, my apologies. The formula for HPR is as you have mentioned correctly. My mistake.