Comparing the dollar-weighted and time-weighted return methods, the
A) two methods give the same return for an actively managed portfolio.
B) time-weighted method is generally preferred.
C) time-weighted return is more dependent on uncontrollable deposits and withdrawals.
D) dollar-weighted return is not affected by clients' actions.

Question

Quizplus · Accepted Answer

The time-weighted return method is generally preferred because it removes the impact of external factors such as deposits and withdrawals, making it a more appropriate measure of portfolio performance. The dollar-weighted return method can be affected by clients' actions, which may skew the results.

Comparing the Dollar-Weighted and Time-Weighted Return Methods, the