The Modified Dietz Method is a calculation used to determine the performance of an investment portfolio based on time-weighted cash flow. In the absence of daily portfolio valuations, the modified Dietz method weights individual cash flows by the amount of time that those cash flows are held (or absent) from the portfolio. The result is an approximation of a time-weighted return.

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  • The Modified Dietz Method is a calculation used to determine the performance of an investment portfolio based on time-weighted cash flow. In the absence of daily portfolio valuations, the modified Dietz method weights individual cash flows by the amount of time that those cash flows are held (or absent) from the portfolio. The result is an approximation of a time-weighted return. The formula for modified Dietz is as follows: <math>R_{MDietz}= \cfrac{ EMV - BMV - CF}{ BMV+ \sum_{i=1}^n Wi \times CF_i}</math> where: EMV = ending market value BMV = beginning market value CF = the net cash flow for the period (contributions to a portfolio are entered as positive cash flows while withdrawals are entered as negative cash flows) and <math>\sum_{i=1}^n Wi \times {CF_i} = </math> the sum of each cash flow, CFi, multiplied by its weight, Wi The weight (Wi) is the proportion of the total number of days in the period that the cash flow CFi is in (or out) of the portfolio. Wi can be calculated as: <math> W_i = \frac{CD-D_i}{CD}</math> where: CD = the number of calendar days during the return period being calculated Di = The day in the return period on which the cash flow (CFi) occurred Excel VBA Function for Modified Dietz Return: Public Function MDIETZ(dStartValue As Double, dEndValue As Double, iPeriod As Integer, rCash As Range, rDays As Range) As Double 'Jelle-Jeroen Lamkamp 10 Jan 2008 Dim i As Integer: Dim Cash As Double: Dim Days As Integer Dim Cell As Range: Dim SumCash As Double: Dim TempSum As Double 'Some error trapping If rCash. Cells. Count <> rDays. Cells. Count Then MDIETZ = CVErr(xlErrValue): Exit Function If Application. WorksheetFunction. Max(rDays) > iPeriod Then MDIETZ = CVErr(xlErrValue): Exit Function ReDim Cash(rCash. Cells. Count - 1) ReDim Days(rDays. Cells. Count - 1) i = 0 For Each Cell In rCash Cash(i) = Cell. Value: i = i + 1 Next Cell i = 0 For Each Cell In rDays Days(i) = Cell. Value: i = i + 1 Next Cell SumCash = Application. WorksheetFunction. Sum(rCash) TempSum = 0 For i = 0 To (rCash. Cells. Count - 1) TempSum = TempSum + (* Cash) Next i MDIETZ = (dEndValue - dStartValue - SumCash) / (dStartValue + TempSum) End Function
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  • The Modified Dietz Method is a calculation used to determine the performance of an investment portfolio based on time-weighted cash flow. In the absence of daily portfolio valuations, the modified Dietz method weights individual cash flows by the amount of time that those cash flows are held (or absent) from the portfolio. The result is an approximation of a time-weighted return.
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  • Modified Dietz Method
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