TTWROR p.a. explanation

English Reports
1

HI
can you help me to understand the meaning and the calculation regarding TTWROR p.a. ? I red the manuals and understood how is calculated for the cum. way, but i don’t understand it in the p.a. version.
thanks

2

P.a. simply means “per year”.

3

per annum is the abbreviation and is latin

4

Thanks. I know the meanining of p.a. I would like to know how is it calculated in the manual it seems very well explained the meaning of ttwror but not how is it calculated in the p.a. Version .

5

Uh, it’s standard mathematics. For example, if the TTWROR is 5% (factor 1.05) for half a year, then the annualized TTWROR is 10.25% (factor 1.1025 = 1.05×1.05); if the TTWROR is 30% (1.3) for two years, then the annualized value is 14.02% (based on the square root of 1.3).

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6

Since PP calculates TTWROR on a daily basis, it is probably easier to specify the holding period in days. The examples then become:

  • If the TTWROR is 30% (factor 1.3) for two years, then the annualized value is 14.02% (based on the square root of 1.3). Or in terms of days: (1.3 ^ (365/730))-1.
  • If the TTWROR is 5% (factor 1.05) for half a year, then the annualized TTWROR is 10.25% (factor 1.1025 = 1.05×1.05).
    Or in terms of days: (1.05 ^ (365/(365/2)))-1
    But, of course, a holding period of 365/2 days is not possible.
  • If the TTWOR is 2% for the month of January 2024, then the TTWROR p.a. = (1.02 ^ (365/31))-1 or 26.26%.

The assumption of 365 days/year is probably the reason why the TTWROR of one year reporting period from today (thus including leap day Feb 29) is slightly different from the TTWROR p.a., although both calculate the performance of one year. For other non-leap years such as 2023, TTWROR and TTWROR p.a. are exactly the same.

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7

Hi everybody.
I am using this thread since I didn´t find something more appropriate.
(Note: english is not my native language :slight_smile: )

In the stocks-performance table (standard) I have selected the colomns TTWOR, TTWOR (p.a) among others (e.g. IZF). So far, I think; i have understood the differences/applications in TTWOR and IZF. And also about the reporting periods as used by portfolio performance.

However, I am wondering about the TTWROR (p.a) calculation shown in this table.
I am holding some stocks/ETFS since 2013, others only for e.g. only three years.

I am wondering on the TTWROR (p.a.) values shown in this table. The “cumulative not annualized TTWROR” seem always correct, independent on the reporting period. However, if the reporting period (in the above example) is set to "starting 1.1.2013) the TTWOR(p.a.) for the ETF bought in 2021 (holding since three years) is calculated based on the starting date 1.1.2013.

Is that correct?

I somehow think, that doesn’t make much sense? Shouldn´t the TTWOR(p.a.) be in that case based on the “holding period”, e.g. the TTWROR(p.a.) should “automatically” be limited to the holding period?

Best regards
Stefan

9

I believe some confusion is involved about the actual purpose of the indicators.

  • TTWROR is utilized to determine the performance of an instrument, independent from cash flows (e.g. removing the impact of your decisions from the indicator).
  • TTWROR(p.a.) is directly connected to TTWROR and obtained when you annualize this TTWROR indicator (e.g. which interest rate needs to be applied to the initial investment amount to obtain the final compounded value of the instrument.)
  • IRR/IZF is utilized to determine the performance of an instrument based on the cash flows (e.g. what is the result of the investment and the impact of your decisions during the holding period).

What is the use of TTWROR?
→ to compare the performance of different instruments against each other (during the selected period).

What is the use of IRR/IZF?
→ to determine the performance of the instrument taking into account the specific cash flows you generated.

Hence, by its very nature, you need to specify the period of comparison for TTWROR, and consequently expecting the TTWROR(p.a.) to adjust to the holding period makes no sense. To compare the performance of different instruments against each other you have to do this on an equal time basis (irrespective of the holding period).

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