Hello: I have the following returns for a sample stock portfolio. When I use cost-weighted gains, the return for the total portfolio is -28% and the return for the sum of all stocks on a cost-weighted basis is also -28%. I get how to explain that. But if an investor wants to use current market weighted returns, the return for the total portfolio is still -28%. But the return for the sum of all stocks on a market-weighted basis is 8%. How would I explain the difference is weighted returns to someone? Thanks for any help!
| weighted-returns (1).xlsx | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| B | C | D | E | F | G | H | I | J | |||
| 2 | Market Value | Cost | Gain | Gain % | Cost Wt | Cost Wt Gain % | MV Wt | Wt Gain MV % | |||
| 3 | S1 | 20 | 10 | 10 | 100% | 7% | 7% | 19% | 19% | ||
| 4 | S2 | 45 | 35 | 10 | 29% | 24% | 7% | 43% | 12% | ||
| 5 | S3 | 40 | 100 | -60 | -60% | 69% | -41% | 38% | -23% | ||
| 6 | 105 | 145 | -40 | -28% | 100% | -28% | 100% | 8% | |||
returns | |||||||||||
| Cell Formulas | ||
|---|---|---|
| Range | Formula | |
| E3:E6 | E3 | =C3-D3 |
| F3:F6 | F3 | =E3/D3 |
| G3:G5 | G3 | =D3/$D$6 |
| H3:H5 | H3 | =F3*G3 |
| I3:I5 | I3 | =C3/$C$6 |
| J3:J5 | J3 | =I3*F3 |
| C6:D6,G6:J6 | C6 | =SUM(C3:C5) |
