Question

Which of the following statement is FALSE about time weighted

return and money weighted return?
a.) capital gains should not be considered in the money weighted
returns calculation
b.) Asset managers

Answer 1

The FALSE statement is that capital gains should not be considered in the money weighted returns calculation.

Step-by-step explanation:

The FALSE statement about time weighted return and money weighted return is option a.) capital gains should not be considered in the money weighted returns calculation. In reality, capital gains should be included in the calculation of both time weighted return and money weighted return.

Time weighted return measures the performance of an investment over a specific period, independent of external cash flows. It takes into account both the investment returns and the time period. On the other hand, money weighted return considers the timing and amount of cash flows, which includes capital gains.