What was the contribution from sector allocation to security selection?Confirm that the sum of contribution of security selection, sector selection and asset allocation isequal manager’s total excess return in relation to the bogey The following information relates to the performance of a manager in 2020.Benchmark weightReturn on the benchmarkActual returnActual WeightEquityBondsCash7.28%0.60.56.00%3.20%0.90%3.60%0.90%0.20.30.20.2Details of investments in different sectors of the equity market are as follows:SectorBeginning of month weights S&P 500 Sector returnBasic material1.966.306.9Business services5.807.107.0Capital goods1.918.804.1Consumer cyclical8.4712.508.8Consumer non-cyclical40.3719.4010.0Credit sensitive24.0120.805.0EnergyTechnology13.5313.202.63.9511.900.6

Expected Return: This time period, specifically, relates to the earnings or loss that an investor…

What was the contribution from sector allocation to security selection? Confirm that the sum of contribution of security selection, sector selection and asset allocation is equal manager’s total excess return in relation to the bogey

What was the contribution from sector allocation to security selection? Confirm that the sum of contribution of security selection, sector selection and asset allocation is equal manager’s total excess return in relation to the bogey

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

What was the contribution from sector allocation to security selection?

Confirm that the sum of contribution of security selection, sector selection and asset allocation is
equal manager’s total excess return in relation to the bogey

The following information relates to the performance of a manager in 2020.
Benchmark weight
Return on the benchmark
Actual returnActual Weight
Equity
Bonds
Cash
7.28%
0.6
0.5
6.00%
3.20%
0.90%
3.60%
0.90%
0.2
0.3
0.2
0.2
Details of investments in different sectors of the equity market are as follows:
Sector
Beginning of month weights S&P 500 Sector return
Basic material
1.96
6.30
6.9
Business services
5.80
7.10
7.0
Capital goods
1.91
8.80
4.1
Consumer cyclical
8.47
12.50
8.8
Consumer non-cyclical
40.37
19.40
10.0
Credit sensitive
24.01
20.80
5.0
Energy
Technology
13.53
13.20
2.6
3.95
11.90
0.6

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