Attribution: Total return = benchmark return + market allocation + currency allocation + security selection. In above two equations, only “security selection” is the same. Correct? Are you interested in rewrite them in formula? Refer to Q5 on P243.
Decomposition different than attribution right? In decomposition you don’t deal with global index stuff, you just figure out portions of the return which are
capital gain…split in two : market return and security selection
+yield return
+currency effect considers effect of appr. or deprc. of currency on values of principal, capital gain and return…
In attribution you look in to how the return occured and use benchmarks to assess the success of portfolio. components are
Currency effect: compare portfolio with benchmark…start with domestic return-local return (to assess if there is any differences which is due to change in FX value) deductlocal return and multiply by correponding port. weight… do the same for related bencmark…deduct currency effect of portfolio from that of benchmark.
Market allocation cont: compares weight of portfolio and benchmark and multiplies the diffrence with local benchmark return
Refer to Q5 on P243.