Question

Assume the that over the past couple of years your investment into a stock that pays no dividends was as follows:

Year	Starting price	Shares bought/sold
2010	49.8	50 bought
2011	55.7	100 bought
2012	50.7	150 sold

What is your dollar-weighted annual return for over this period for this investment?

Enter answer in percents, to two decimal places.

Bonus exploratory question: how does this compare to the average annual return, or the geometric average annual return?

Answer 1

Cash Flow In year 2010 =Number of Shares*Price =50*49.8=-2490
Cash Flow In year 2011 =Number of Shares*Price =55.7*100=-5570
Cash Flow In year 2012 =Number of Shares*Price =50.7*150=7605
Dollar Weighted Return using financial calculator
CF0=-2490;CF1=-5570;CF2=7605;CPT IRR =-4.36%

Dollar Weighted Return =-4.36%

Return in 20-21 =(55.7-49.8)/49.8 =11.85%
Return in 21-22=(50.7-55.7)/55.7 =-8.98%
Arithmetic Mean =(11.85%-8.98%)/2 =1.44%
Geometric Mean =((1+11.85%)*(1-8.98%))^(1/2)-1 =0.90%

Arithmetic and Geometric return are more than the dollar weighted return of the stock. In fact dollar weighted return is negative.
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