# CFAI text Vol. 6

Example #5 and 6: These problems are out of this world!!??? Are we responsible for them???

volume 6 is big, what examples ? what section>

derswap07, Do you mean Example #5 and 6 of R47 on P218~226 ? If so, I am much frustrated by them too. I understand the logics but I may give up if such kinds of questions appeared on the exam because I have no confidence to calculate correctly under the time pressure, especialy AM session. But anyone else will be appreciated if he can advise some good ways or short-cuts.

Vol 6, page 243 #5 and page 244 # 6. AMC, Multiple currency contribution pages you mentioned, the explanation is much better in Schwesers. Take a read and you still have problems, I am ready to help. This concept is ver easy-just looks monstrous.

derswap07, OK, I will read Schweser’s multiple currency contribution portion and I will come back to you if I still have any problem. But the Schweser studynote on my hand is 2009 version. TKVM in advance !

AMC, I think this material was there last year.

derswap07, Schweser 2009 V5 P241~244 Please advise if following are correct (if no cash flow yield) : 1. If no int’l (world) benchmark (index) is provided R.p.d = R.b.d (=ÓWi,b x Ri,b.d) + SS + MA + CAC = ÓWi,p x Ri,p.d 2. If int’l (world) benchmark (index) is provided R.p.d = IB Return + SS + MA + CAC = ÓWi,p x Ri,p.d IB Return : (IBT/ IB0) – 1 R.p.d : domestic return on the portfolio R.b.d : domestic return on the benchmark SS : Security Selection contribution MA : Market Allocation contribution CAC : Currency Alocation contribution IB : Int’l (world) benchmark (index) IBT : Int’l (world) benchmark (index) at the terminal IB0 : Int’l (world) benchmark (index) at the inception TKVM for help in advance !

correction 1. If no int’l (world) benchmark (index) is provided R.p.d = R.b.d [= Sigma (Wi,b x Ri,b.d)] + SS + MA + CAC = Sigma (Wi,p x Ri,p.d)

derswap07, 1. Please response to my previous 2 messages at your convenience 2. I am confused by following teminologies used in CFAI text & Schweser Capital gain = Return (in local currency or home currency, without cash flow) ? Total capital gain in (each) currency = Total return in (each) currency(without cash flow) ? Currency component = Currency contribution = Currency effect ? Market return = Benchmark’ return (for indivisual security and/or portfolio) ? 3. What are the tangible definitions of Total-Return Decomposition & Performance Attribution (Analysis) ? Is there a clear/tangible borderline ? 4. Old exam 2007 AM Q9 Shall we assume that the weights of local index (benchmark) are all zero ? TKVM for your help !

derswap07, I studied the multiple currency contribution (including “multiple attributes”) in Schwser note and now I have a better understanding. currency contribution. If I have any further problem I will come back to you. Would you please response to my previous messages ? Many thanks !

I spent a lot of time with example 5, the result is here: http://www.analystwiki.com/wiki/index.php/Global_Performance_Evaluation,_by_Bruno_Solnik_and_Dennis_McLeavey,_CFA

naze_duck Wrote: ------------------------------------------------------- > I spent a lot of time with example 5, the result > is here: > > http://www.analystwiki.com/wiki/index.php/Global_P > erformance_Evaluation,_by_Bruno_Solnik_and_Dennis_ > McLeavey,_CFA naze_duck, TKVM for your information !

AMC, I was swaped on the weekend. Are you clear on this or you still want me to take a look?

derswap07, Regarding multiple currency contribution & multiple attributes in R48, I have a better understanding" now. However, to make sure that I have no more misunderstanding, would you please kindly response to previous messages sent on : March 20, 2010 09:12, March 20, 2010 09:38AM and March 20, 2010 10:56PM. Thank you so much again for your help !

AMc, Take a look at http://www.analystforum.com/phorums/read.php?13,965608

derswap07, 1. I have no further confusion regarding “multiple currency contribution & multiple attributes” in Reading of Global Performance Evaluation. 2. I got following learning outcomes after my reviewing of Schweser 2009 V5 P241~244 (Example : Return decomposition) and I think they are important. If you are interested in them, please check if following are correct (if no cash flow yield) : 1) If no int’l (world) benchmark (index) is provided R.p.d = R.b.d [= Sigma (Wi,b x Ri,b.d)] + SS + MA + CAC = Sigma (Wi,p x Ri,p.d)R.p.d 2) If int’l (world) benchmark (index) is provided R.p.d = IB Return + SS + MA + CAC = ÓWi,p x Ri,p.d [IB Return : (IBT/ IB0) – 1] R.p.d : domestic return on the portfolio R.b.d : domestic return on the benchmark SS : Security Selection contribution MA : Market Allocation contribution CAC : Currency Alocation contribution IB : Int’l (world) benchmark (index) IBT : Int’l (world) benchmark (index) at the terminal IB0 : Int’l (world) benchmark (index) at the inception 3. On the other hand, I am confused by following terminologies used in CFAI text & Schweser. Please confirm following. it’s better for us to clarify to avoid confusion. Capital gain = Return (in local currency or home currency, without cash flow) ? Total capital gain in (each) currency = Total return in (each) currency(without cash flow) ? Currency component = Currency contribution = Currency effect ? Market return = Benchmark’ return (for indivisual security and/or portfolio) ? 4. What are the tangible definitions of Total-Return Decomposition & Performance Attribution (Analysis) ? Is there a clear/tangible borderline ? 5. Old exam 2007 AM Q9 Shall we assume that the weights of local index (benchmark) are all zero ? I hope that you are interested in these issues. TKVM !