P134 of Vol 6, Why TWR typically requires daily valuation?
it requires valuation on any day a cash flow takes place in the portfolio. assuming that a portfolio of sufficient size will experience some trading activity almost daily, daily valuations will be required. any more comments will be helpful.
so external cash flows are affected by trading besides cash contribution/withdrawl?
i am confused on this …
TWR required a/c valuation whenever external CF occurs (not internal CF, dividend reinvestment is not counted). External CF includes contribution and withdraw from fund. TWR calculation requires compounding for each subperiod return, each subperiod return =(MV1-CF-MV0)/MV0. You need to know MV1 and MV0 whenever external CF occurs.
lzhao Wrote: ------------------------------------------------------- > so external cash flows are affected by trading > besides cash contribution/withdrawl? Yes, but I think the focus of the exam will be on cash contributions/withdrawals.