calculation-reference

CFA Level I Ethics and GIPS Performance Calculations

Public reference for GIPS-linked return, composite, dispersion, and performance presentation calculations.

TL;DR

Ethics is mostly conceptual, but GIPS-related performance presentation can require return linking, composite returns, dispersion, and fee treatment awareness.

Formula Reference

Linked return

Linked return = [(1 + r1)(1 + r2)...(1 + rn)] - 1

Used for multi-period performance.

Asset-weighted composite return

Composite return = sum[account weight x account return]

Weights are based on account values.

Dispersion

Dispersion can be measured as range or standard deviation of account returns

Follow the question's stated measure.

BA II Plus Keystrokes

  1. Use geometric linking for multi-period returns.
  2. Use STO/RCL for account weights and account returns.
  3. Use DATA/STAT for standard deviation if dispersion is required.

Worked Example

  • Two accounts have weights 40 percent and 60 percent with returns 8 percent and 12 percent.
  • Composite return = 0.40 x 8 + 0.60 x 12 = 10.4 percent.
  • Use the same weighted-average process as portfolio return.

Common Mistakes

  • Arithmetic averaging linked returns.
  • Ignoring fee basis when the question asks gross-of-fees or net-of-fees.
  • Using equal weights for an asset-weighted composite.

Related Guides