Re: Interpolated prices on ROI Yield

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In Reply to: Interpolated prices on ROI Yield posted by Bill on August 13, 2005 at 00:09:18:

: Hi -
: The ROI Yield Report has me a bit puzzled in the longer date ranges. Sometimes I'll get a * for interpolated price, or an N/A if there's no data close enough to interpolate - that part makes sense. But other times I'll see the yield in one column carried across identically to the later columns. In some cases 10y yields are reported even though the investments are less than a year old.

: Example:

: I purchased 2 lots of VEURX, both in May 2005. That's it, no other transactions. However, I did retrieve 10 years of price history.

: When I look at the ROI Yield Report, it shows:

: 3m 44.80
: 6m 39.33*
: 1y 39.33
: 3y 39.33
: 5y 39.33*
: 10y 39.33*

: Since my earliest investment is in 2005, why don't I see N/A in the longer time periods? I thought the ROI yields were based on the actual date I invested.

: It's also curious that the values in 5 different time periods are identical...

: The above numbers assume yield interpolation range is either set to 2 days or not enforced. I experimented and changed it to 1 day. The *s changed to N/A, but the remaining numbers are no less puzzling - they're identical and they pre-date my investment.

: 3m 44.80
: 6m N/A
: 1y 39.33
: 3y 39.33
: 5y N/A
: 10y N/A

: Can you help me understand what's going on?

: Thanks
: Bill

Hi Bill,

Yes, I can see this being confusing... What is happening is that whenever a price is available for a yield term longer than you've owned it, the yields are all the same. This is because the ROI yield only looks at your invested dollars, and since you didn't own the shares during this period, your yields is not affected positively or negatively, it just stays the same as what you earned over the period where you did own shares.

If you read how the ROI Yields are calculated here:

http://www.fundmanagersoftware.com/help/yields_roi.html

you can see why the yields all end up the same for time periods longer than you owned it. The "Starting Value" is always 0, so the first term doesn't matter. Another way to think about it is that since you didn't own any shares, anything that happened during that time period doesn't help or hurt your ROI yield.

I do see how it is confusing though, as you weren't actually earning this percentage for that long of a period. I think a good solution here may be to change the behavior of the "Options / Yield Interpolation Range... / Allow Interpolation Prior to First Recorded Price" option. This option would stay the same for the "Fund Performance" yields, as they only look at the underlying instrinsic investment, but for the "ROI Yields" it would stop interpolating prior to the first transaction, rather than recorded price. Thanks for pointing this out, and making me think about it again... I'll plan on getting this into a future version.

Thanks,
Mark
--
Mark Beiley
Fund Manager, portfolio management software for Windows 95/98/ME/NT/00/XP/2003

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