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Default Annualization Method

For the Default annualization method, the Performance Link Analysis returns are annualized using the following formula:

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• ITD as of 6/30/2002 = 12 / (12 + 12 + 6) = 12 / 30
• 2YR as of 6/30/2002 = 12 / (12 + 12) = 12 / 24
• 18MO as of 6/30/2002 = 12 / (12 + 6) = 12 / 18

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Days Annualization Method

The Days annualization method uses an actual day count regardless of the business calendar option, data frequency, or period type. The numerator to the annualization factor is variable by changing the performance system parameter setting, Sys Item 9, called "Numerator for annualization based on days." In addition, the return is only annualized if there are more than 365 days in a given period, unless that period has February 29th. In that case, more than 366 days are required. This is the same logic the default option uses.

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Months Annualization Method

The Months annualization method uses a month count regardless of the business calendar option, data frequency, or period type. The numerator to the annualization factor would be hard coded to 12. The month count in the denominator is determined by counting all the months in a period, unless the period includes inception or termination dates. If the period contains an inception or termination date, a fractional representation of the inception or termination month is used instead of a count of 1. This fractional representation is calculated using the number of days in the month minus the inception day then divided by the number of days in the month.

For termination dates, the fraction is calculated by taking the termination day number divided by the number of days in the given month. A number is only annualized if there are more than 12 months in a given period.

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Numerator for Annualization Based on Days

When annualizing based on days, instead of hard coding the numerator of the annualization factor to 365, the performance system parameter, Sys Item 9, (SYS_ITEM) stores a number to use instead of 365. This setting applies to the Days method only.

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