This section describes how to use the Modified Dietz field to calculate a monthly return. The Modified Dietz field calculates an approximate monthly return on a day weighted basis. Credit is given to a portfolio manager for performance based on the amount of days that a position was in the portfolio.

Eagle provides several approaches for calculating monthly returns, including linking daily returns to create a monthly return. For more information about choosing an approach, see "Choosing Choose an Approach for Calculating Monthly Returns."

Anchor
_Toc521324133 _Toc521324133

About the Modified Dietz Formula

...

The Modified Dietz calculation can calculate monthly returns for partial periods. This methodology is useful for calculating returns for positions that an entity does not hold for the entire period, such as when a position is completely sold out of or newly bought in during the month. This works at each level of the performance model wherever the position is not in the account for the entire month, from the security level through the total level. The Partial Period Modified Dietz calculation has the ability to weight the cash flows based on the number of days the position exists rather than weighting them using the number of days within the month.

The following table shows how Eagle Performance calculates Modified Dietz inputs for the begin of day, end of day, and middle of day weighting methods. It presents three possible partial period scenarios where there is no beginning market value, no ending market value, and no beginning or ending market value. The Modified Dietz calculation does not change when both begin and ending market values are present for a position.

...

The Dollar Value Added (DVA) field is related to the Modified Dietz field. It displays the numerator of the Modified Dietz calculation and it is useful for troubleshooting purposes.

The basic calculation follows.
EMV-BMV-Sum of Cash Flows
Where:
EMV is ending market value
BMV is beginning market value
The following figure shows an example of the Dollar Value Added field.

...

The Average Invested Balance (ABAL) field is related to the Modified Dietz field. It displays the denominator of the Modified Dietz calculation and is useful for troubleshooting purposes.
You can commit the ABAL field to the database for use as the weight field in attribution reporting.

The basic calculation follows.
BMV+Sum of Weighted Cash Flows
Where:
BMV is the beginning market value

The following figure shows an example of the Average Invested Balance field.