Hi, We know that the portfolio return can be broken up into 3 components: P = M + S + A M = Market index return S = Excess return to style A = Active return Which components of the micro performance attribution (sector allocation, allocation/selection integration, within-sector allocation) are part of the active return ? More specifically, is the sector allocation a style contribution or an active return contribution ? Thanks in advance, Bern
I think you’re linking two concepts that aren’t presented together. But if I had to break it down, I would say this: Style = B-M Active = P-B Sector Allocation = Style Within-Sector Allocation = Active return Allocation/Selection would probably fit into Active return as well.
This 2 concepts where presented in the same session. According to page 158:it is said that value-added return = active return. In others words, the 3 components of the micro-attribution are part of the active return…
I think the value -added return is true active return = actual return -nomal benchmark so the micro is based on true active return Sector Allocation manager’s work overwight or underwight Within-Sector Allocation security selection analyst’s work Allocation/Selection more complicated and interactive