For micro attribution the formula for within sector allocation is Wb,j*(Rp,j-Pb,j) while for global attribution the formula for security allocation is wj,p*(R,j,p,f-Rj,b,f). Why do you weight the micro by the benchmark weight and the global by the portfolio weight? It seems like they should both weight by the benchmark. I must be missing something here…?
I guess you cant compare these or something since the market attribution formulas are different as well. Am not sure why though.
This is something I’ve been wondering for a long time. Pls if anyone knows the rationalle behind this let us know. I suppose an argument can be made for using the benchmark or portflio weight?
s23dino Wrote: ------------------------------------------------------- > For micro attribution the formula for within > sector allocation is Wb,j*(Rp,j-Pb,j) while for > global attribution the formula for security > allocation is wj,p*(R,j,p,f-Rj,b,f). Why do you > weight the micro by the benchmark weight and the > global by the portfolio weight? It seems like > they should both weight by the benchmark. I must > be missing something here…? The reason is simple, for micro attribution you have sector/security allocation part for global you dont. You just have to remember 1 thing Rp*Wp-Rb*Wb is your difference. You can twist it anyway you want but in the end (after all parnthesis are open and simple algebra is performed) you will get Rp*Wp-Rb*Wb summed across all sectors.