Mario Luongo and Bob Weaver both purchase the same stock for €100. One year later, the stock price is €110 and it pays a dividend of €5 per share. Weaver decides to buy another share at €110 (he does not reinvest the €5 dividend, however). Luongo also spends the €5 per share dividend but does not transact in the stock. At the end of the second year, the stock pays a dividend of €5 per share but its price has fallen back to €100. Luongo and Weaver then decide to sell their entire holdings of this stock. The performance for Luongo and Weaver”s investments are as follows:
|
Luongo |
Time-weighted return |
= |
4.77 percent |
|
Money-weighted return |
= |
5.00 percent |
|
|
Weaver: |
Money-weighted return |
= |
1.63 percent |
Briefly explain any similarities and differences between the performance of Luongo”s and Weaver”s investments.