Hi, this question relates to Reading #51 - Analysis of Active Portfolio Management, specifically to Active Return decomposed in asset allocation return + security selection return.
I do not understand the formulas.
E(Ra) = Asset Allocation Return + Security Selection Return
E (Ra) = (Sum of Active Weights * Benchmark returns) + (Sum of Active Returns * _ Portfolios weights _)
Why Benchmark Returns?? And why Portfolio weights??
Thanks for your help!