Mario Luongo and Bob Weaver both purchase the same stock for €100. One year later, the stock price is €110 and it pays a of €5 per share. Weaver decides to buy another share at €110 (he does not reinvest the €5 however). Luongo also spends the €5 per share but does not transact in the stock. At the end of the second year, the stock pays a 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?
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