Modified Dietz Method

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.

BREAKING DOWN '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.