Consider the following performance data for a fund manager and the managers benchmark portfolio. Benchmark Fund Manager
Question:
Consider the following performance data for a fund manager and the manager’s benchmark portfolio.
Benchmark | Fund Manager | |||
Weight | Return | Weight | Return | |
Stock | 0.6 | 7.6% | 0.8 | 9.2% |
Bonds | 0.3 | 1.2% | 0.15 | 1.3% |
Cash | 0.1 | 0.6% | 0.05 | 0.5% |
a. Calculate (i) the overall return to the benchmark portfolio and (ii) the overall return to the fund manager’s actual portfolio. Briefly comment on whether the fund manager has under or outperformed the benchmark fund.
b. Using attribution analysis, calculate (i) the selection effect for the fund manager and (ii) the allocation effect for the manager.
c. Using these numbers in conjunction with your results from Part a, comment on whether the manager has added value through selection skills, allocation skills, or both.
Vector Mechanics for Engineers Statics and Dynamics
ISBN: 978-0073212227
8th Edition
Authors: Ferdinand Beer, E. Russell Johnston, Jr., Elliot Eisenberg, William Clausen, David Mazurek, Phillip Cornwell