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115 CFA
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115.100.02.01 Portfolio Management - Reading 52 - 1. Major Return Measures

1. Major Return Measures

a. calculate and interpret major return measures and describe their appropriate uses;

What is the formula for Holding Period Return?
$$R_t = \frac{P_t - P_{t - 1} + D_t}{P_{t-1}}$$

What is the formula for Mean Return?
$$\mu = \frac{\sum X_i}{N}$$

What is the formula for Geometric Mean Return?
$$G = \sqrt[n]{X_1 X_2 X_3 ... X_n}$$

What is the dollar weighted rate of return?
The dollar-weighted rate of return is essentially the internal rate of return (IRR) on a portfolio.

What is time-weighted rate of return?
The time-weighted rate of return measures the compound growth rate of $1 initial investment over the measurement period.

What is the formula for return on a portfolio of assets?
$$E(R_p) = \sum\limits_{i} \omega_i E(R_i)$$
- R_p = Return on the portfolio
- R_i = Return on asset i
- \omega_i = Weighting (share) of asset i


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  • CFA