I keep forgetting the formulas in module 36.4 (Macro & Micro Attribution). Technically they are easy and I fully understand them, I just keep forgetting and mixing them.
Does somebody has an easy way of memorizing?
I just memorized the six formulas. I write them before sleeping every night. I got freaked out by seeing these in the 2015 AM exam and not willing to take a chance.
For macro, the Manager return formula is pretty easy because it’s just manager weight X asset weight X (manager actual return - manager benchmark return). The Style formula is similar: manager weight X asset weight X (manager benchmark return - asset benchmark return). The Asset Class return formula is Asset Class weight X (benchmark asset return- Rf rate). I haven’t shown the sum functions here, but you get the point.
For micro, I start with Pure sector allocation, which is (Portfolio weight - Benchmark weight) X (Benchmark weight for asset i - Overall benchmark return). The Interaction formula is similar: (Portfolio weight - benchmark weight) X (Portfolio return - benchmark return). The Within formula is: Benchmark Weight X (Portfolio return - benchmark return).
It’s portfolio - benchmark, not benchmark - portfolio.
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That’s more like it.
Well yea they are for asset i…
Marc LeFebvre (of LevelUp Bootcamp fame) has an awesome mnemonic device for this. I don’t know if it’s his brainchild or not, but it’s brilliant.
CFAI is clear with micro attribution. They have good examples.
But the macro attribution doesn’t have any examples. How do the formulas interact with the macro attribution analysis?
I haven’t done the 2015 mock yet, but I want to learn as much as I can before tackling.
Decision-Making Level** (Investment Alternative) Fund Value Incremental Return Contribution Incremental Value **Contribution Beginning value $186,419,405 — — Net contributions 187,369,405 0.00% 950,000 Risk-free asset 187,944,879 0.31% 575,474 Asset category 194,217,537 3.36% 6,272,658 Benchmarks 194,720,526 0.27% 502,989 Investment managers 194,746,106 0.01% 25,580 Allocation effects 194,816,599 0.04% 70,494 Total fund
There’s actually three types of Macro Questions that can be asked. I’ve done enough mocks to be able to wize through these 3 questions pretty fast 
1.) Macro inputs:
- Policy Allocations
- Benchmark Returns
- Fund Returns, Valuations and E-cashflo
- Macro attribution that fosh mentioned, where they give you the numbers already
- Contributions
- Risk-Free
- Asset Category (passive return)
- Misfit/Benchmark (style return)
- Manager Selection (active return)
- Alloc Effects
3.) Macro attribution where they ask for the calculations (unlikely to be tested)
- Risk Free Return = Rf
- Asset Return = wi (Rb-Rf)
- Misfit = wiwj (Rbi-Rb)
- Manager Selection = wiwj (Rpi-Rbi)
The LOS is: demonstrate and contrast the use of macro and micro performance attribution methodologies to identify the sources of investment performance;
That loosely translated becomes --> better learn those formulas or else…
The online topic tests have several questions on this, as does the 2015 actual exam. There’s no way I’d skip this.