INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 24, Problem 18PS
Summary Introduction
To calculate:The performance of Primo portfolio and its contribution to performance of the pure sector allocation and security selection decisions.
Introduction:
Pure sector selection effect: It is a procedure to be followed by a manager to calculate the overweight and underweight amount of over/under weight security.
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Primo Management Company is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about benchmark portfolios and is interested in trying this approach. As such, the company hired Sally Jones, CFA, as a consultant to educate the managers on the best methods for constructing a benchmark portfolio, how to choose the best benchmark, whether the style of the fund under management matters, and what they should do with their global funds in terms of benchmarking.
For the sake of discussion, Jones put together some comparative two-year performance numbers that relate to Primo’s current domestic funds under management and a potential benchmark.
Style Category
Weight
Return
Primo
Benchmark
Primo
Benchmark
Large-cap growth
0.60
0.50
17%
16%
Mid-cap growth
0.15
0.40
24
26
Small-cap growth
0.25
0.10
20
18
As part of her analysis, Jones also takes a look at one of Primo’s global funds. In this particular portfolio, Primo is invested…
Primo Management Company is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about benchmark portfolios and is interested in trying this approach. As such, the company hired Sally Jones, CFA, as a consultant to educate the managers on the best methods for constructing a benchmark portfolio, how to choose the best benchmark, whether the style of the fund under management matters, and what they should do with their global funds in terms of benchmarking.
For the sake of discussion, Jones put together some comparative two-year performance numbers that relate to Primo’s current domestic funds under management and a potential benchmark.
Style Category
Weight
Return
Primo
Benchmark
Primo
Benchmark
Large-cap growth
0.60
0.50
17%
16%
Mid-cap growth
0.15
0.40
24
26
Small-cap growth
0.25
0.10
20
18
As part of her analysis, Jones also takes a look at one of Primo’s global funds. In this particular portfolio, Primo is invested…
Primo Management Co. is looking at how best to evaluate the performance of its managers.
Primo has been hearing more and more about benchmark portfolios and is interested in trying
this approach. As such, the company hired Sally Jones, CFA, as a consultant to educate the
managers on the best methods for constructing a benchmark portfolio, how to choose the best
benchmark, whether the style of the fund under management matters, and what they should do
with their global funds in terms of benchmarking.
For the sake of discussion, Jones put together some comparative 2-year performance numbers
that relate to Primo's current domestic funds under management and a potential benchmark.
Style Category
weight of
Primo
Large-cap
growth
Mid-cap growth 0.15
Small-cap
growth
0.60
0.25
weight of
Benchmark
0.50
0.40
0.10
return of Primo return of Benchmark
(%)
(%)
17
23
19
14
26
17
Calculate the contribution to performance of the pure sector allocation. Round your answer to
two decimal place. Do not…
Chapter 24 Solutions
INVESTMENTS(LL)W/CONNECT
Ch. 24 - Prob. 1PSCh. 24 - Prob. 2PSCh. 24 - Prob. 3PSCh. 24 - Prob. 4PSCh. 24 - Prob. 5PSCh. 24 - Prob. 6PSCh. 24 - Prob. 7PSCh. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Prob. 10PS
Ch. 24 - Prob. 11PSCh. 24 - Prob. 12PSCh. 24 - Prob. 13PSCh. 24 - Prob. 14PSCh. 24 - Prob. 15PSCh. 24 - Prob. 16PSCh. 24 - Prob. 17PSCh. 24 - Prob. 18PSCh. 24 - Prob. 19PSCh. 24 - Prob. 20PSCh. 24 - Prob. 21PSCh. 24 - Prob. 22PSCh. 24 - Prob. 1CPCh. 24 - Prob. 2CPCh. 24 - Prob. 3CPCh. 24 - Prob. 4CPCh. 24 - Prob. 5CPCh. 24 - Prob. 6CPCh. 24 - Prob. 7CPCh. 24 - Prob. 8CPCh. 24 - Prob. 9CPCh. 24 - Prob. 10CPCh. 24 - Prob. 11CPCh. 24 - Prob. 12CPCh. 24 - Prob. 13CPCh. 24 - Prob. 14CP
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