Portfolio Performance Evaluation

Free CFA Level III: Private Wealth lesson in Performance Measurement. 37 min read, ~5,570 words.

Brinson attribution decomposes active return into allocation, selection, and interaction effects, which must sum to total active return. Allocation effect = (portfolio weight - benchmark weight) x (benchmark sector return - total benchmark return). Selection effect = benchmark weight x (portfolio sector return - benchmark sector return). Macro attribution operates...