Question: An active portfolio manager outperformed the benchmark last year by 2.26 %, where the benchmark is the S&P500 index. In analyzing the portfolio for return attribution using the Carhart 4 factor model, you find the following results:
| Factor |
Portfolio Sensitivity |
Benchmark sensitivity |
Factor return (%) |
| RFRF |
1.05 |
1.02 |
4.67 |
| SMB |
-1.05 |
-0.99 |
2.54 |
| HML |
0.47 |
0.02 |
4.71 |
| WML |
0.35 |
-0.02 |
6.22 |
What was the return to the portfolio resulting from the security selection component?