Market-adjusted implementation shortfall

The implementation shortfall for the buy order of Microsoft is 0.87%. Assuming the predicted return on Microsoft (based on its beta x return on the market portfolio) is +2%, the market adjusted implementatin shortfall is actually negative 0.87% - 2% = -1.13%. -2% represent the market movement which the trader should not be held responsible (i.e he wants to buy the stock but it trended higher).

Where did you read this? I don’t think it’s in the CFAI curriculum, is it?

It’s def in schweser – V5 p 21, part of LOS 44.g MAIS = IS - Beta(RetMkt) …just adjusting your Implementation shortfall calc for market movements, which the trader shouldn’t be penalized for

it’s in the CFA cirriculm as well, pg 27, Vol 6, last paragraph.