Portfolio Performance Evaluation

CFA Level III Portfolio Management
#1

Hi All

Request your help, in Reading 35 Portfolio performance Evaluation Equation 3 for allocation affect gives the formula Equation (3)

Ai = (wi – Wi ) Bi

But when i go to the Macro attribution Example section the formula changes to (wi – Wi ) *(Bi-B)
where B is the total benchmark return , could someone pls explain why ? Thanks.

#2

You can check out the errata on CFA Institute website.

In the BHB model (Brinson-Hood-Beebower), they use

A_i = (w_i – W_i ) \times B_i

to lay the foundation.

The Brinson-Fachler model is the focus for the rest of the topic, which is the one with:

A_i = (w_i – W_i ) \times (B_i - B)

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Portfolio Performance Evaluation - Allocation effect
#3

Thank you Fino !

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