Using the data in Table 19.15, compute the managers country and currency selection if portfolio weights had
Question:
Using the data in Table 19.15, compute the manager’s country and currency selection if portfolio weights had been 40% in Europe, 20% in Australia, and 40% in the Far East.
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TABLE 19.15 Example of performance attribution: international Europe Australia Far East EAFE Weight 0.30 0.10 0.60 Currency selection EAFE: Manager: Loss of 1% relative to EAFE Return on Equity Index 10% 5 15 Country selection EAFE: Manager: Loss of 0.25% relative to EAFE Stock selection Currency Appreciation E₁/E₁ - 1 10% Overall performance (dollar return = return on index + currency appreciation) EAFE: .30(10 + 10) +.10(510)+.60(15+30) = 32.5% .35(8 + 10) +.10(7-10)+.55(18 + 30) = 32.4% Manager: Loss of .10% relative to EAFE - 10 30 Manager's Weight (0.30 × 10%) + (0.10 × (-10%) ) + (0.60 x 30%) = 20% appreciation (0.35 × 10%) + (0.10 × (-10%)) + (0.55 × 30%) = 19% appreciation (0.30 × 10%) + (0.10 x 5%) + (0.60 x 15%) = 12.5% (0.35 × 10%) + (0.10 x 5%) + (0.55 x 15%) = 12.25% 0.35 0.10 0.55 Manager's Return 8% 7 18
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Related Book For
Essentials Of Investments
ISBN: 9780073368719
7th Edition
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
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