A potential investor wishes to understand the skills of a Fund Manager. Attribution analysis uses the Fund
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Question:
A potential investor wishes to understand the skills of a Fund Manager. Attribution analysis uses the Fund Manager's and Benchmark's asset allocations and returns across asset classes to calculate Security Selection and Market Timing effects.
Asset Class
Fund Weight
BM Weight
FM Return
BM Return
Equity
20%
50%
6%
8%
Real Estate
80%
50%
7%
6%
Use the information on the Fund Manager's and Benchmark's allocations and returns across the two asset classes above to:
(i)CalculatetheMarket Timing (Allocation) effectandStock Selection effect.
(ii)Comment on the Fund manager's skillsto generate abnormal returns through Market Timing and Stock Selection.
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