4. Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager's portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4 (9 Marks): Actual Return Actual Weight Benchmark Weight Index Return Equity 2.2% 0.5 0.5 2.7% (S&P 500) Bonds 1 0.2 0.2 1.2 (Barclay's Aggregate) Cash 0.6 0.3 0.3 0.7 a) What was the manager's return in the month? (2 Marks) b) What was her overperformance or underperformance? (1 Mark) What was the contribution of security selection to relative performance? (3 Marks) d) What was the contribution of asset allocation to relative performance? (3 Marks)
4. Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager's portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4 (9 Marks): Actual Return Actual Weight Benchmark Weight Index Return Equity 2.2% 0.5 0.5 2.7% (S&P 500) Bonds 1 0.2 0.2 1.2 (Barclay's Aggregate) Cash 0.6 0.3 0.3 0.7 a) What was the manager's return in the month? (2 Marks) b) What was her overperformance or underperformance? (1 Mark) What was the contribution of security selection to relative performance? (3 Marks) d) What was the contribution of asset allocation to relative performance? (3 Marks)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:4. Consider the following information regarding the performance of a money manager in a recent month.
The table represents the actual return of each sector of the manager's portfolio in column 1, the fraction
of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in
column 3, and the returns of sector indices in column 4 (9 Marks):
Actual
Return
Actual
Weight
Benchmark
Weight
Index Return
Equity 2.2% 0.5
0.5
2.7% (S&P 500)
Bonds 1
0.2
0.2
1.2 (Barclay's Aggregate)
Cash
0.6
0.3
0.3
0.7
a) What was the manager's return in the month? (2 Marks)
b) What was her overperformance or underperformance? (1 Mark)
What was the contribution of security selection to relative performance? (3 Marks)
d) What was the contribution of asset allocation to relative performance? (3 Marks)
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