Consider the following performance data for two portfolio managers (A and B) and a common benchmark portfolio: BENCHMARK MANAGER A MANAGER B Weight Return Weight Return Weight Return Stock 0.7 -4.8% 0.7 -3.9% 0.3 -4.8% Bonds 0.2 -3.1 0.1 -2.2 0.4 -3.1 Cash 0.1 0.3 0.2 0.3 0.3 0.3 a. Calculate (1) the overall return to the benchmark portfolio, (2) the overall return to Manager A's actual portfolio, and (3) the overall return to Manager B's actual portfolio. Briefly comment on whether these managers have under- or outperformed the benchmark fund. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Overall return Benchmark Manager A % Manager B % Manager A has -Select- ) the benchmark fund. Manager B has -Select- ) the benchmark fund. b. Using attribution analysis, calculate (1) the selection effect, and (2) the allocation effect for both Manager A and Manager B. Using these numbers in conjunction with your results from Part a, comment on whether these managers have added value through their selection skills, their allocation skills, or both. Do not round intermediate calculations. Round your answers to two decimal places. If the answer is zero, enter "0". Selection effect Allocation effect Manager A % Manager B % Manager A has added value through his/her -Select- v skills. Manager B has added value through his/her -Select- v skills.
Consider the following performance data for two portfolio managers (A and B) and a common benchmark portfolio: BENCHMARK MANAGER A MANAGER B Weight Return Weight Return Weight Return Stock 0.7 -4.8% 0.7 -3.9% 0.3 -4.8% Bonds 0.2 -3.1 0.1 -2.2 0.4 -3.1 Cash 0.1 0.3 0.2 0.3 0.3 0.3 a. Calculate (1) the overall return to the benchmark portfolio, (2) the overall return to Manager A's actual portfolio, and (3) the overall return to Manager B's actual portfolio. Briefly comment on whether these managers have under- or outperformed the benchmark fund. Round your answers to two decimal places. Use a minus sign to enter negative values, if any. Overall return Benchmark Manager A % Manager B % Manager A has -Select- ) the benchmark fund. Manager B has -Select- ) the benchmark fund. b. Using attribution analysis, calculate (1) the selection effect, and (2) the allocation effect for both Manager A and Manager B. Using these numbers in conjunction with your results from Part a, comment on whether these managers have added value through their selection skills, their allocation skills, or both. Do not round intermediate calculations. Round your answers to two decimal places. If the answer is zero, enter "0". Selection effect Allocation effect Manager A % Manager B % Manager A has added value through his/her -Select- v skills. Manager B has added value through his/her -Select- v skills.
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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Transcribed Image Text:Consider the following performance data for two portfolio managers (A and B) and a common benchmark portfolio:
BENCHMARK
MANAGER A
MANAGERB
Weight Return
Weight Return
Weight Return
Stock
0.7
-4.8%
0.7
-3.9%
0.3
-4.8%
Bonds
0.2
-3.1
0.1
-2.2
0.4
-3.1
Cash
0.1
0.3
0.2
0.3
0.3
0.3
a. Calculate (1) the overall return to the benchmark portfolio, (2) the overall return to Manager A's actual portfolio, and (3) the overall return to Manager B's actual portfolio. Briefly
comment on whether these managers have under- or outperformed the benchmark fund. Round your answers to two decimal places. Use a minus sign to enter negative values, if
any.
Overall return
Benchmark
Manager A
%
Manager B
%
Manager A has -Select-
v the benchmark fund.
Manager B has -Select-
| the benchmark fund.
b. Using attribution analysis, calculate (1) the selection effect, and (2) the allocation effect for both Manager A and Manager B. Using these numbers in conjunction with your results
from Part a, comment on whether these managers have added value through their selection skills, their allocation skills, or both. Do not round intermediate calculations. Round
your answers to two decimal places. If the answer is zero, enter "0".
Selection effect Allocation effect
Manager A
%
%
Manager B
%
%
Manager A has added value through his/her-Select-
v skills.
Manager B has added value through his/her -Select-
v skills.
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