I am looking for some help to understand the below concept !
Reading 35 Risk attribution
There is a tab where you have the investment process : bottom up, top down factor based.
Regarding top down (industry selection etc…) relative risk attribution the analysis of tracking error is : attribute tracking error to allocation and selection (I guess it is allocation to industries etc vs benchmark ?)
Regarding risk absolute attribution, it is factor marginal contribution to risk.
My question : why allocating risk attribution to factors if the decision is not factor based ? Why not allocating risk based on decisions made ex : choosing different industry exposure
Let me know if not clear