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#reading-7-discounted-cashflows-applications
In the dollar-weighted rate of return if funds are added to a portfolio when the portfolio is performing well (poorly), the dollar-weighted rate of return will be inflated (depressed).
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Subject 3. Dollar-weighted and Time-weighted Rates of Return
The dollar-weighted rate of return is essentially the internal rate of return (IRR) on a portfolio. This approach considers the timing and amountof cash flows. It is affected by the timing of cash flows. If funds are added to a portfolio when the portfolio is performing well (poorly), the dollar-weighted rate of return will be inflated (depressed). The time-weighted rate of return measures the compound growth rate of $1 initial investment over the measurement period. Time-weightedmeans that returns are averaged over t


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