This is Q6 from Schweser (Pg 78/ Reading#44) A manager of an international PF uses identical country weights in both P/F & benchmark. Which of this is true? a) Both currency & market allocation effects are zero b) Neither effects are zero c) Only Market allocation effect is zero d) Only currency allocation effect is zero Answer provided: (d) I’d think the answer is ©. Currency Effect = Sum[Wp*Cp - Wb*Cb] Market Effect = Sum[(Wp-Wb)*Rb] Even if weights are same, the currency effect for P/F & Benchmark could be different depending on securities selected (different returns & hence response to currency) But when wts are same, it is clear from above is market effect = 0 Can someone clarify? - BN
Did you check the errata?