Portfolio Management: Active Return, Active Weight

CFA Level II Portfolio Management
#1

Hi,

I am getting really confused with examples 1 and 2. How do you know when to use active weight x benchmark return and when to use active weight x active return.

#2

Which Example 1 and Example 2 are you referring to?

#3

active weight x active return gives a portfolio’s total active return

active weight x benchmark return gives the amount of active return that’s generated from asset allocation (i.e., not including active return that’s generated from security selection)

#4

Thanks so much!