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 |
0.5 |
15% |
0.6 |
20% |
0.4 |
13% |
| Bonds |
0.3 |
7% |
0.2 |
9% |
0.5 |
10% |
| Cash |
0.2 |
3% |
0.2 |
4% |
0.1 |
2.5% |
1. Work out the overall return of the Portfolio using;
E(Rp)=W1*E(A)+W2*E(B)+W3*E(C)
2. Using attribution analysis; calculate the selection effect and the allocation effect for Managers A and B.