"W" wrote:
I can only say this is fairly hideous in how they
implemented it. The function has complex assumptions,
and it seems like a pretty broken implementation to have
to keep all of that straight.

I think you misunderstood. It has nothing to do with assumptions of any
Excel function or its implementation. It is the __concept__ of IRR (its
most common definition, that is) that I was speaking about.

You asked why the IRR is not a positive percentage, which you expected for
the short sale that resulted in a net gain.

I tried to explain that IRR, when defined to be the discount rate that
causes the NPV to be zero, is simply not the correct concept for you to use
for that situation.

Perhaps I made things too complicated for you when I tried to explain why,
namely: if you are expecting a positive IRR, the magnitude of the sum of
the later cash flows must be greater than and the opposite of sign (positive
or negative) of the initial cash flow. It is simply a mathematical reality
of the NPV formula.

If you don't gronk that, ignore the technical explanation. Just know that
the (NPV-based) IRR is not the right concept for you to use. (And I never
heard of any other definition of IRR.)

I also provided you with the correct formula to use for computing the
annualized rate of return for a short sale, namely:

(1 + (s-p)/s)^(365/days) - 1

where "s" is the initial net sales proceeds (less transaction and margin
costs), "p" is the later net purchase proceeds (less transaction costs), and
"days" is the hold time.

That should answer the question for you.