The performance attribution question has the following answer for the first part ( Market Return) "Market return measures the performance that would have been achieved had the manager invested in a local market index instead of individual securities. Market return = Σ wi × Local index returni " According to the material : Market Return = Sum [( wip - Wib) RibLC] In this case, I assumed (since the fund is only available to Australian investors) that the weights for the benchmark are (0, 0 , 1). The equation they have used assumes that the alternative for the investor is to earn zero return on his money ( not invest it all in Australian Index). Any ideas ?
the 1st equation should work out fine, no? the 2nd equation is to calc market allocation effect, not market return though.
The question did not specify a benchmark, but I assumed that anything we do in this attribution material has some kind of benchmark, and when they said “Only Australian Investors” I assumed the benchmark is the Australian Index.
i wont make that stretch. i guess “only australian investors” would indicate “AUS” being base currency.