dont kniow if this was already raised on this board. But something that caught me yeseterday is the within sector selection on micro has the weight of the benchmark for the weight used whereas the the weight of the portfolio is used for the security allocation effect which in my opinion is really annoying. Since they are calculating essentially the same thing cant we have some consistency?
apparently, security allocation = within security selectoin + allocatoin/selection affects…I haven’t tried to verify this…but this what I read somewhere… between CFAI, Stalla, AF…it’s hard to say where I get these things from…
I just did a brain dump and was able to write down the correct formulas from memory. I am so proud of myself. I will definately delete all this stuff from my mental hard drive as soon as I walk out of that exam room.
Security Selection = Within Sector Allocation for Micro. For Macro, its the difference between the Portfolios LC return and the Markets LC return. Right?
That wasnt the point though bigwilly … ON a global basis you need to look at the portfolio weight not the benchmark. My friend at work pointed this oout to me
global lumps the equivalent of micro’s security selection and allocation/selection interaction both into security selection. this is commonly done for micro attribution as well just to simplify the calc and since the allocation/selection interaction should be minimal if the benchmark is well-chosen.
I havent memorized any formula yet. I will memorize about 7-8 formulas 2 days b4 the exam. the rest will be pure logic. (I dont count IR=AR/Ar, things like that)
If you combine Within Sector Allocation + Allocation/Selection Interaction formulas for Micro then you will get portfolio weight times difference in returns between portfolio and bencmark same way as it done in Global