Groundlearn / Glossary / Time-weighted return
Time-weighted return (TWR)
Also called TWR. A CFA term, defined in plain English with the distinction examiners test.
What it means
The compound growth of one unit of currency in a portfolio, with the effect of external cash flows removed by chain-linking sub-period returns.
The exam angle
The GIPS-required basis for comparing managers, precisely because it is immune to client cash flow timing.
Where it appears in the syllabus
- Quantitative MethodsCFA Level I · exam weight 11–14% · Returns and benchmarks, time value, distributions, portfolio maths, regression.
- Performance MeasurementCFA Level III · exam weight 5–10% · Attribution, appraisal, manager selection and the GIPS standards.
Related terms
- AlphaReturn in excess of what the asset’s risk exposures would predict.
- Money-weighted returnThe IRR of a portfolio including the timing and size of every contribution and withdrawal.
- AnnuityA series of equal cash flows at equal intervals.
- Arithmetic meanThe sum of the observations divided by their number.
- Bayes’ formulaA rule for revising the probability of an event in the light of new information, using how likely that information is…
- BootstrapResampling the observed data with replacement to estimate the sampling distribution of a statistic, without assuming a…
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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