PATCH: Advanced portfolio report revisions
ajswest at mindspring.com
Sun Dec 9 13:57:50 EST 2007
On Sun, Dec 09, 2007 at 08:35:25AM -0500, Mike or Penny Novack wrote:
> >We believe, but we are not sure, that the Microsoft-Money "Annual % Return" is the Internal Rate of Return (IRR). See http://support.microsoft.com/kb/131664. We believe that the IRR is the "best" measure of return, because it allows any two investments to be meaningfully compared.. The calculation is non-trivial. I recommend "Financial Calculation Programs for Linux" by James Shapiro at http://www.linuxjournal.com/article/2545. He gives C, Java, and Perl programs for calculating IRR.
> Close. But just IRR by itself without including its standard deviation
> for the time period doesn't allow proper comparison of investments. Not
> that past measures of "risk" provide a certain measure for the future
> but it's the best that is available. The point here is that investment A
> with an IRR of M but a large deviation might not be a better than
> investment B with an IRR of N slightly smaller than M but with a much
> smaller deviation. The usual idea is that the real comparison gets made
> after adjusting for risk -- how much of the higher yielding would
> instead have to be invested at low yield very low risk to bring the
> blend to the same deviation -- and then use that blended yield.
are their concrete, empirical methods for determining this risk
factor? IOW, is it something that can just be calculated from the
information at hand? Is it really relevant within the context of this
report and its "snapshot" of the portfolio?
I admit that I understand next to nothing of these things and am
coding in the dark, as it were. Hence my questions above.
> The problem is that the deviation can't be simply calculated from the
> beginning and ending states but needs the history in between.
We do have the hsitroy in between, at whatever resolution the user has
bothered to enter it. I would imagine someone who truly wanted this kind of
information would be the type of person to take the time to enter
historical information at the level required.
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