While calculating Time weighted composite return ,
Is there any difference (in calculating answers) between
asset-WEIGHTING the individual portfolio returns using a method that reflects both beginning-of-period values and external cash flows
or
using the Aggregate Return method ?
Both the methods seems same to me .
Thematically they are different. Mathematically, they might be similar. In the Aggregate Return method, the whole composite is treated as a single composite and MD return is calculated for the same. The more granular Beginning Period PF Value with External Cashflow weights every portfolio in the composite with their respective weights. The same might show the individual PF whose return contributed the most to the composite’s returns due to most probably the ECFs. You may think of the Aggregate Method as a type of Macro measure and the Asset weighted method to be more granular for the purpose of analysis.