I learned a way to make an equation simpler for pure allocation effect following, allocation, equation

RoastBeef

I was looking at a question to calculate pure allocation effects for manager performance. The usual is to sum the following

(Manager weight - benchmark weight)(benchmark return - average return)

I solved the problem the following way

(manager weight - benchmark weight)(Benchmark return)

The average return will sum to zero since the numbers on the right side sum to zero anyways. I always learned this equation the Schweser way, but I just realized that you can make it much simpler using my method. Try it out and see if it works. Let me know your results.

zwjy

Good point

dyga

This is true if you need effect for all sectors only. If the question is to calc effect for one sector I think CFAI prefers expression as in curriculum