# CFAI Reading 48 - Global Perf. Evaluation

Folks, I am working though Example 6 (Multiperiod Analysis) on pg 206. In the Solution to 1., there is a calculation to derive Market allocation. Now, I don’t recognize the formula that they used. Based on Equation 48-6, Market Allocation is basically: (weight on sector j in portfolio - weight on sector j in the benchmark) x Benchmark return. Now, when I use this formula, I arrive at the overall correct answer. However, I am not able to replicate the book’s answer on a country-specific basis - i.e. I get 2.0% +0.0% = 2.0% for market alloc. using Eq. 48-6. However, the example formulates 1% + 1% = 2%. I am not sure what I am missing in terms of understanding the book’s approach in calculating the mkt. allocation contribution. I’ll appreciate any pointers. Thank you. Shams.

Shams, Schweser actually mentions this “discrepancy” in the curriculum as CFAI textbooks use 2 different formulas for market allocation (one in Micro attribution and another in Global Attribution). They even asked the institute about it, where they replied that both formulas measure the same thing… Actually, as you already precised, both formula yield the same result on an agregate basis, although the individual country results are different… This is why you got the 2% right but the individual allocations were different. Schweser concludes by stating that since we don’t have to perform those kind of calculations on the exam, we will not be troubled by this discrepancy. I personnaly doubt we won’t have to do those calculations, so better be prepared… Hope that helps… Just to see if I remember them: in Micro attribution the formula is (WjP - WjB)(RjB- RB) and the formula for global attribution is the one you stated: (WjP - WjB)(Rb)… I 'm just confused wether in the second formula the last term is RjB

HI CFALEB, Thanks for your message. I read the CFAI text for the attribution section. The market allocation calculation given in the reading is (wj - w*) x Ij where Ij would be the benchmark return. I tried to be consistent by using the original formula given in the performance attribution section b using it for the multi-period multi-attribute calculation given in Example 6 Not sure why they would make the Example calculation non-intuitive but I guess it’s okay!! I appreciate your clarification. Cheers, Shams.