Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager’s portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4. Actual Return Actual Weight Benchmark Weight Index Return Equity 2% 0.70 0.60 2.5% (S&P 500) Bonds 1 0.20 0.30 1.2 (Barclay’s Aggregate) Cash 0.5 0.10 0.10 0.5 b. What was the contribution of security selection to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) c. What was the contribution of asset allocation to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager’s portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4. Actual Return Actual Weight Benchmark Weight Index Return Equity 2% 0.70 0.60 2.5% (S&P 500) Bonds 1 0.20 0.30 1.2 (Barclay’s Aggregate) Cash 0.5 0.10 0.10 0.5 b. What was the contribution of security selection to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.) c. What was the contribution of asset allocation to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager’s portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4.
| Actual Return | Actual Weight | Benchmark Weight | Index Return | |
|---|---|---|---|---|
| Equity | 2% | 0.70 | 0.60 | 2.5% (S&P 500) |
| Bonds | 1 | 0.20 | 0.30 | 1.2 (Barclay’s Aggregate) |
| Cash | 0.5 | 0.10 | 0.10 | 0.5 |
b. What was the contribution of security selection to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.)
c. What was the contribution of asset allocation to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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