In the end this will just come down to memorization, but I’m trying to understand this intuitively if possible… If I want to calculate the security selection component for a mgr, why do I use the mgr’s wts and not the BM wts? For me it would make logical sense to use the BM wts multiplied by the difference in returns in the base currency, so you are in effect isolating just the security returns, holding sector allocation constant.
I was under the impression that for security selection, you do use BM wts…recalling from memory though. It would seem intuitive though.
In micro performance attribution sector selection attribution uses BM weights (which makes sense to me…) My question is regarding the global portfolio attribution…
I’m pretty sure we use portfolio weights for security selection for currency attribution. Correct me if I’m wrong .
For security selection: Micro: Use benchmark weight Global: Use portfolio weight The reasoning behind this is because in the global section, the interaction term is collapsed into the selection term. Refer to some of my other posts for a more detailed explanation.