In measuring the comparative performance of different fund managers, the preferred method of calculating rate of return is
A) internal rate of return.
B) arithmetic average.
C) dollar weighted.
D) time weighted.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

Time-weighted returns are preferred for comparing the performance of fund managers because they eliminate the effects of cash flows, which the manager typically does not control. This method provides a more accurate measure of the manager's investment decisions over time.

In Measuring the Comparative Performance of Different Fund Managers, the Preferred