Solving the Puzzle of IRR Equation: Choosing the Right Solution to Measure Investment Success

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The authors of this book published many articles in peer-reviewed professional journals, including several articles that received awards. This time, they study the problem of multiple roots of IRR equation and introduce a novel “largest root” rule for selecting the correct solution, which effectively resolves the puzzle of IRR equation. Besides this main subject of the book, other important approaches and concepts that relate to the problem and investment performance measurement are considered, such as the concept of investment context. Within this conceptual framework, the authors study and compare different methods for calculating rates of return, such as IRR, Modified Dietz, TWRR, geometric linking, NPV, MIRR, etc., and introduce improvements and generalizations of existing methods and propose several new ones. The book also considers algorithms for linking rates of return. Overall, the book provides an excellent, concise but nonetheless comprehensive, overview of investment performance measurement problems and related issues and presents well founded solutions. The book was written for a wide audience of financial industry professionals, academics and students studying finance and investment business.

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About the author (2011)

Yuri Shestopaloff started his career as an Applied Mathematician and Engineer-Physicist. He received his M.Sc and Ph.D degrees from Moscow Institute of Physics and Technology, focusing on developing mathematical methods and algorithms for data interpretation. He accomplished his PhD and the Doctor of Sciences degree, the highest academic degree in European countries, for developing mathematical methods for data interpretation. He has worked as Associate Professor, Full Professor and Chair at Electrical Engineering Department of Academy of Transport. Simultaneously; he held position of Chief Scientist at Institute of Sensor Microelectronics of Russian Academy of Sciences. Yuri K. Shestopaloff does consulting and research on mathematical methods and computational algorithms in various fields of science and technology. He also consults on system design issues, and leads software development projects. He has published ten professional books and ninety academic articles on financial mathematics, biology, remote sensing, applied mathematics, wave propagation theory, mathematical methods and algorithms for data interpretation. The results of his researches on financial mathematics received awards. His literary achievements include warmly regarded rhythmic and melodic poetry with lyrical and thoughtful content, and short stories, published in periodical magazines and also as separate books. Readers' comments and reviews of stories are very positive and inspiring. Yuri likes many physical fitness activities, including cross-country skiing, swimming, trail hiking, bicycle rides, as well as other regular fitness exercising. Alexander Yu. Shestopaloff Alexander is presently a PhD student at the Department of Statistics, University of Toronto. He is a recipient of provincial and federal governments' scholarships. Previously, he published several articles on the subject, one of which received an award from the Journal of Performance Measurement. His areas of interests also include machine learning, neural networks, theory of probability, and teaching statistics. He is a good swimmer and squash player. Other sporting activities include mountain hiking, cross-country skiing, running and weightlifting.

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