Attribution analysis Mock Exam AM session Q45

CFA Level III
#1

Hi forum,

just a quick question regarding question 45 in the CFA Mock Exam AM session.

We should perform an attribution analysis, in particular calculating the the excess return arising from active factor weighting.

The solution calculates it this way:

sum of ( (portfolio weight of factor 1 * portfolio return of factor 1) - (benchmark weight of factor 1 * benchmark return of factor 1) ) / total effect

My question now: For micro attribution analysis I have 3 formulas:

(i) pure sector selection, (ii) within sector selection and (iii) allocation/selection interaction but none of them is equal to the formula above stated.

Any tips on such questions?

Many thanks and kind regards

#2

What have they asked you to calculate ?

#3

Question was: “…the percentage of the excess return of the River Valley Fund arising from active factor weighting is closest to:”

#4

So just actively weigh the factor returns, negate from benchmark factor returns and divide the excess by excess portfolio returns.