Hi, Everyone,
I know it has something to do with the properties of Geometric Returns ( or Time weighted returns), I still cannot find the connection. I need your help.
When calculating performance returns, if the ending market value was underestimated in one of the period (let say January 2010 MV was too low), it does not have much of an impact for YTD returns because May 2010 MV was correct (it catch up the market value).
However, if in January 2010, you had a big inflow, January 2010 underestimated MV will impact the YTD returns a lot (Geometrical linked returns), no matter how May 2010 MV catch up.
Do you know why?
Thank you for your help.
I know it has something to do with the properties of Geometric Returns ( or Time weighted returns), I still cannot find the connection. I need your help.
When calculating performance returns, if the ending market value was underestimated in one of the period (let say January 2010 MV was too low), it does not have much of an impact for YTD returns because May 2010 MV was correct (it catch up the market value).
However, if in January 2010, you had a big inflow, January 2010 underestimated MV will impact the YTD returns a lot (Geometrical linked returns), no matter how May 2010 MV catch up.
Do you know why?
Thank you for your help.
