Convert Effective Annual ROR into quarterly ROR

[Dkline]

I have used the XIRR function which returns an Effective Annual Rate of Return.

9/30/2008 -$104,119.16
10/1/2008 $942.05
10/6/2008 -$4,924.67
11/1/2008 $944.31
11/3/2008 -$4,966.81
12/1/2008 $945.74
12/3/2008 -$5,274.03
12/31/2008 $92,520.92
-61.52%

How do I convert the -61.52% into a ROR for the quarter?

 

[Shane Devenshire]

Hi,

Divide by 4.

 

[joeu2004]

I have used the XIRR function which returns an Effective
Annual Rate of Return.
[....]
How do I convert the -61.52% into a ROR for the quarter?

There are two schools of thought on this. The academic world is split
50-50.

The simplest approach is to compute a simple (non-compounded) rate by
dividing the XIRR result by 4. Personally, I think that is wrong,
especially if you are using XIRR.

The other approach is to compute the compounded quarterly rate. For
example, RATE(4,0,-1,1+XIRR(...)). Alternatively: (1+XIRR(...))^
(1/4)-1.

The "correctness" of one approach over the other depends, in part, on
how you plan to use the quarterly rate. But since XIRR per se is
compounded daily, I would say that any sub-annual rate derived from
XIRR should be a compounded rate.


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