6F 111 Investments Performance Attribution 2

6F 111 Investments Performance Attribution 2 - 6F:111...

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Unformatted text preview: 6F:111 Investments Professor Gerry Suchanek PERFORMANCE ATTRIBUTION Superior investment performance depends on being in the right securities at the right time. Investment decisions have three (03) parts: 1) Broad asset market allocation choices. 2) Industry (or sector) choices within each asset market class. 3) Security choices within each sector. E.G. 1) Investment allocation to equities, bonds, & money market securities. 2) Sector emphasis such as energy, precious metals, large cap, mid-cap, small cap, financials, etc., & treasures, corporates, junk bonds, etc. 3) Individual securities within each sector, such as Exxon-Mobil w/in energy sector, Jones Soda w/in small-cap, etc. Performance attribution measures the contribution of each component of the investment decision to the return performance of the portfolio created (the managed portfolio). This is an alternative to focus on risk-adjusted returns when evaluating performance. The Attribution Method can be used to measure & explain the difference in returns between any two portfolios. In principle, however, the method is used to explain the difference in returns between a Managed Portfolio and a Benchmark Portfolio (often called the Bogey Portfolio)....
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6F 111 Investments Performance Attribution 2 - 6F:111...

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