Reading 48: Global Performance Evaluation Los e~Q1-5 periods, discuss, between, multiple, difference

youzizhang

 

LOS e: Explain the difficulties in calculating a multi-period performance attribution and discuss various solutions.

Q1. The total active return over multiple periods is most accurately determined by:

A)   taking the difference between the compounded portfolio and benchmark returns.

B)   compounding the active return for each period.

C)   summing the active return for each period.

 

Q2. In determining the two period active return for a multi-attribution analysis which of the following statements is least accurate?

A)   The total active return for the portfolio is found by summing the compounded active return for each attribute.

B)   Each attribute’s contribution in the first period is compounded at the benchmark rate of return over the second period.

C)   Each attribute’s contribution in the second period is compounded with the portfolio return from the first period.

 

Q3. If the return on a portfolio over two periods is 8.6% and 14.32% respectively and the benchmark’s returns are 6.9% and 11.7% respectively what is the two period active return?

A)   4.74%.

B)   4.36%.

C)   4.32%.

 

Q4. The two period active return for a portfolio can be determined by:

A)   taking the active return on the portfolio in the first period multiplied by the return on the benchmark in the second period plus the active return in the second period multiplied by the total return on the portfolio in the first period.

B)   compounding the individual one period active returns.

C)   maintaining the same security or market allocation proportions for each period, compounding the individual one period active returns for each attribute, and then summing the compounded returns to get an overall total active return.

 

Q5. Given the following information for the returns of a portfolio and its benchmark what is the active return for each attribute and the overall active return for the portfolio?

Period	Portfolio Returns	Benchmark Returns	Proportion of Return due to Security Selection Effect (SSE)	Proportion of Return due to Market Allocation Effect (MAE)
1	8.90%	6.90%	40%	60%
2	14.54%	11.30%	20%	80%

 

          SSE                                            MAE                 Active Return

 

A)  1.450%                                    3.823%                                       5.27%

B)  1.596%                                    4.158%                                       5.75%

C)  1.448%                                    3.792%                                       5.24%

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