Attribution Analysis Conclusion

Easy Performance Evaluation Attribution Analysis

An investor is analyzing the performance of their portfolio over the last year. They are particularly interested in understanding how the selection of securities versus asset allocation influenced the portfolio’s returns. To achieve this, they decide to conduct an attribution analysis.

In this analysis, they find that their portfolio had a total return of 10%, while the benchmark return was 8%. The analysis reveals that the selection of individual securities contributed positively, adding 3% to the return, whereas the strategic asset allocation detracted from performance by 1%.

Based on this information, which of the following conclusions can the investor draw regarding the attribution analysis of their portfolio?

The entire excess return is attributed to security selection.

The portfolio outperformed the benchmark due to security selection and asset allocation together.

Asset allocation was the primary driver of outperformance.

Hint

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% Correct88%