A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various countries in whatever proportions she finds desirable. Results for a given month are contained in the following table: Return of Stock Index for That Weight In MSCI Country U.K. Index Manager's Weight Manager's Return in Country 0.21 0.42 21% Japan 0.34 0.2 14% U.S. Germany 0.39 0.06 0.3 10% 0.08 5% Required: Country 12% 14% 12% 12% a. Calculate the total value added of all the manager's decisions this period. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. b. Calculate the value added (or subtracted) by her country allocation decisions. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. c. Calculate the value added from her stock selection ability within countries. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.
A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various countries in whatever proportions she finds desirable. Results for a given month are contained in the following table: Return of Stock Index for That Weight In MSCI Country U.K. Index Manager's Weight Manager's Return in Country 0.21 0.42 21% Japan 0.34 0.2 14% U.S. Germany 0.39 0.06 0.3 10% 0.08 5% Required: Country 12% 14% 12% 12% a. Calculate the total value added of all the manager's decisions this period. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. b. Calculate the value added (or subtracted) by her country allocation decisions. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. c. Calculate the value added from her stock selection ability within countries. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.
Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
Problem 1P
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Vijay
Transcribed Image Text:A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be
evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various
countries in whatever proportions she finds desirable. Results for a given month are contained in the following table:
Return of Stock
Index for That
Weight In MSCI
Country
U.K.
Index
Manager's Weight
Manager's Return
in Country
0.21
0.42
21%
Japan
0.34
0.2
14%
U.S.
0.39
0.3
10%
Germany
0.06
0.08
5%
Required:
Country
12%
14%
12%
12%
a. Calculate the total value added of all the manager's decisions this period.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by
a minus sign.
b. Calculate the value added (or subtracted) by her country allocation decisions.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by
a minus sign.
c. Calculate the value added from her stock selection ability within countries.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by
a minus sign.
a. Added value
b. Contribution of country allocation
c. Contribution of stock selection
%
%
%
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