What are the methodologies use to calculate the returns?

Question

Accepted Answer

Various methodologies are used to calculate returns, including time-weighted, money-weighted, and geometric.

Time-weighted returns measure the performance of a portfolio over a specific period of time, regardless of cash inflows or outflows.
Money-weighted returns take into account the timing and amount of cash flows into and out of a portfolio.
Geometric returns calculate the compounded rate of return over a period of time.
Other methodologies include simple returns, logarithmic returns, and excess returns.
The choice of methodology depends on the specific investment strategy and goals of the portfolio.
For example, a long-term investor may prefer to use geometric returns to measure the overall performance of their portfolio over time.
On the other hand, a trader who frequently buys and sells securities may prefer to use time-weighted returns to evaluate the effectiveness of their trading strategy.

Top BNY Intermediate Representative interview questions & answers