Understanding Attribution Analysis in Portfolio Management

Imagine a scenario where a portfolio manager is assessing the performance of a mutual fund compared to a benchmark index. The fund has returned 10% over the last year, while the benchmark index has returned 8%. The portfolio manager is interested in understanding how different asset classes, such as equities and bonds, contributed to the fund's overall performance relative to the benchmark.

For this essay, explain the key concepts of attribution analysis and how they could be applied in this scenario. Discuss how attribution analysis can identify whether the fund's performance is due to asset allocation decisions, security selection, or other factors.