Modified Dietz Method

AAA

DEFINITION of 'Modified Dietz Method'

A method of evaluating a portfolio's return based on a weighted calculation of its cash flow. The Modified Dietz Method takes into account the timing of cash flows, and assumes that there is a constant rate of return over a specified period of time. The Modified Dietz Method is more accurate than the Simple Dietz Method, which assumes that all cash flows come from the middle of the period of time being evaluated.

INVESTOPEDIA EXPLAINS 'Modified Dietz Method'

The Modified Dietz Method is a dollar-weighted analysis of a portfolio's return. It is a more accurate way to measure the return on a portfolio than a simple geometric return method, but can run into problems during periods of heavy volatility or if there are multiple cash flows within a particular period.

RELATED TERMS
  1. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  2. Sortino Ratio

    A modification of the Sharpe ratio that differentiates harmful ...
  3. Time-Weighted Rate of Return

    A measure of the compound rate of growth in a portfolio. Because ...
  4. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  5. Return

    The gain or loss of a security in a particular period. The return ...
  6. Jensen's Measure

    A risk-adjusted performance measure that represents the average ...
Related Articles
  1. Gauge Portfolio Performance By Measuring ...
    Fundamental Analysis

    Gauge Portfolio Performance By Measuring ...

  2. What are the benefits and costs (or ...
    Mutual Funds & ETFs

    What are the benefits and costs (or ...

  3. What are the main differences between ...
    Mutual Funds & ETFs

    What are the main differences between ...

  4. Mutual Funds Commonly Found In Retirement ...
    Mutual Funds & ETFs

    Mutual Funds Commonly Found In Retirement ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center