MOCK question "recreation" Macro Attribution

:slight_smile:

Sh!t I messed up you are right Tanyusha. The Return on Asset Category should be the Bencmark. Risk-Free = 0.41% Asset Category = 0.6%*(4.45 – 0.41) + 0.4*(2.4 – 0.41) = 3.22% Benchmark = 0.6 *0.5 *(4.84 – 4.45) + 0.6 *0.5 * (4.20 – 4.45) + 0.4 * 0.5 * (1.8 – 2.4) + 0.4 * 0.5 * (3.5 – 2.4) = +0.142% Active = 0.6 * 0.5 *(4.74 – 4.84) + 0.6 * 0.5 * (4 – 4.2) + 0.4 * 0.5 * (1.7 – 1.8) + 0.4 * 0.5 * (3.4 – 3.5) = -0.13%

Asset Categyr is the differential between the Asset Category’s BENCHMARK RETURN and Rf rate. I wont forget that again! So Asset Category and Benchmark all use Benchmark returns, not until the Active Return do you use the Managers return…

damn …easy there bigwilly …ur killin the curve for the rest of us …take ur time get a few questions wrong for the rest of ur AF peeps …

I translated the math into English. Are these correct? * Asset Category Contribution: the sum of … the asset category weight times the difference between the asset category’s benchmark return and the risk-free rate for that period * Benchmark Contribution: the sum of … the asset category weight times manager weight times difference between manager’s benchmark return and the asset category’s benchmark return * Active Contribution: the sum of … asset category weight times manager weight times difference between manager’s actual return and the manager’s benchmark return

^YES

so in all of this what is the misfit return?

in macro att, misfit = benchmark contribution, if i remember correctly

so if we use the above formuals we get the actual returns due to asset category, benchmark and investment manager, right? we dont have to subtract the previosu category return from the next category, right? then how do calculate the misfit? is misfit simply equal to benchmark return?

yes, you can calculate them separately for the misift, just sum of each one´s benchmark versus each one´s asset category

OK I am glad I saw this… calculations & formulas make sense. much easier than micro is there a reason why FI is not included in asset category? also misfit return is the difference between investor’s benchmark and manager’s benchmark so in this case it seems its benchmark contribution

easy bigwilly, your first trial is right…I checked Schweser notes… asset category is the weighted sum of differences between asset manger returns, not benchmark, and risk free rate.

i disagree

No tommy, its the Asset Category’s Benchmark Return and Rf rate.

hmmm - shouldn’t the benchmark level return be (in English) sum of (policy allocation)(manager weight)(benchmark return - asset category return) (.6)(.5)(4.45-3.22)+(.4)(.5)(2.4-3.22)=.205 Note the 3.22 is the asset category return as per tanyusha. Otherwise, how does the 3.22 fit into the picture? We don’t factor in investment manager returns until the next stage of the process… Which leads to the next question: the investment manager return is sum of (policy allocation)(manager weight)(manager return - benchmark return) which benchmark return would we use? I assume the one calculated above…

tommy - I think it’s actually allocation to the asset class, not the actual managers…

gottyou…I screwed up. asset categry return in the notes means asset category return of the market(benchmark), not the portfolio…