Attribution Analysis in Portfolio Management

Emma is a portfolio manager overseeing a diversified equity fund. At the end of the year, she performs performance attribution analysis to assess how her fund's returns can be explained by decisions regarding asset allocation and stock selection. The fund generated a total return of 12% while the benchmark index returned 10%. In her analysis, she notes that her overweight in technology stocks contributed 3% to the fund’s return, while underweighting consumer goods detracted 1%. Additionally, her stock selection within healthcare added 2%, but stock selection in the energy sector detracted 1%. With this information, Emma wants to understand the effectiveness of her choices relative to the benchmark.

Assuming the total active return of her fund is calculated as the difference in return between the fund and the benchmark, which of the following statements regarding attribution analysis is correct?