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The AIRR Approach for Investment Performance Measurement


  • Carlo Alberto Magni



This paper introduces a new method of investment performance analysis, based on the recent approach of Average Internal Rate of Return (AIRR). We show that the approach generates rates of return suitable for assessing both a fund´s (portfolio´s) performance and a manager´s performance. The metrics proposed are arithmetic means of holding period rates weighted by market values. The Internal Rate of Return (IRR) is shown to be a particular case of AIRR, associated with an automatically implied invested capital which has not to do with market values. Relations with the Time Weighted Rate of Return (TWRR) are investigated.

Suggested Citation

  • Carlo Alberto Magni, 2012. "The AIRR Approach for Investment Performance Measurement," PROYECCIONES FINANCIERAS Y VALORACION 009652, MASTER CONSULTORES.
  • Handle: RePEc:col:000463:009652

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    References listed on IDEAS

    1. Magni, Carlo Alberto, 2005. "On decomposing net final values: EVA, SVA, and shadow project," MPRA Paper 12357, University Library of Munich, Germany.
    2. Carlo Magni, 2005. "On Decomposing Net Final Values: Eva, Sva and Shadow Project," Theory and Decision, Springer, vol. 59(1), pages 51-95, August.
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    More about this item


    performance measurement; AIRR; value added; internal rate of return; time-weighted rate of return;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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