Reading 42 Market Allocation question question, different, allocation

therecruit

Im seeing 2 different ways of calculating this but I think both will get the same answer and I’m hoping someone can confirm this for me.
Looking at pg 205  reading 42 market allocation is calculated as market over/under weight * rate of return of specific market allocation
but on pg 213 it is calculated as market over/under weight * (rate of return of specific market allocation - total rate of return)
I believe either will work but not seeing well defined formula…hopfully my expalation is not too confusion but its from example 4 and example 6 of reading 42.

Chuckrox

1st example Pg 205 is an actual performance attribution where you look at sources of return .This is an overall decomposition ( essentially single period )
Second one Pg 213  is an example of multi-factor, muli-period retrn attribution . It is just an illustration of the multi-period attribution calculation , don’t take it to the bank to encash into sources of return.
It could have been any other factors in Pg 213 such as Value Manager & Growth Manager ,or Small Caps and Large Caps . You would proceed wih the bmulti-period calc exactly the same way but to get explanation for different factors.

chetan86

The first one is market allocation return component of portfolio return attribution whereas the second one is called as Pure sector/market allocation. My response in the exam will depend on the specific data provided in the input. I guess that second application will specifically require to calculate  ‘pure sector allocation return’.

Chuckrox8

still see 1st example and part 1 of the 2nd example asking exactly the same thing on market allocation but being calculated 2 different ways.  But i also tried a few examples using both steps for calculating and come up with the same answer so just wanted to know why they used different steps and did not provide a well defined formula.