Wednesday webinar at one: Use and abuse of IRRs: dollar-weighted returns don’t tell us much about investor timing.

Wednesday 07 February 2024 | 13:00 - 13:40 | Webinar

The dollar-weighted return (IRR) on an asset or asset class takes account of aggregate investor cashflows into, or out of, the asset during the period concerned. The fact that these IRRs tend to be lower than the corresponding time-weighted (GM) returns is often interpreted as evidence that investors  time their investments badly.  

For investors, it is crucial to be aware that estimates of this supposed effect are widely circulated, and there is a prevalent use of a systematic investment strategy designed to deliberately enhance the IRR. Regrettably, this analysis is entirely misleading. 

During this webinar, Dr. Simon Hayley, Senior Lecturer in Finance, Bayes Business School will present research based on the published paper Hayley, S. (2014). Hindsight effects in dollar-weighted returns. Simon will discuss: 

  • How low dollar-weighted returns are more likely to represent the effect of additional investments made following periods of high returns as investors “chase returns”. 
  • The retrospective bias in the IRR that provides no insights into investor timing.  
  • He will emphasise the need for caution and scepticism among investors when interpreting IRRs. 


Registration: 12:55
Event: 13:00 - 13:40


Dr. Simon Hayley, Senior Lecturer in Finance, Bayes Business School 

Simon Hayley joined Bayes Business School (formerly Cass) following a career as an economic adviser at HM Treasury and the Reserve Bank of New Zealand, and as a market analyst for a range of city institutions.

His research at Bayes has been published in leading global journals. A key theme in this research is investor behaviour and the misconceptions that sometimes drive it. Based on his teaching, he wrote "Economics: A Primer" (OUP, 2018) with Alec Chrystal.

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