What is performance attribution, and how does it inform our understanding of investment performance|Essay guru

Posted: January 28th, 2023

What is performance attribution, and how does it inform our understanding of investment performance?

SOLUTION

Performance attribution is the process of analyzing the sources of return for a given investment portfolio. It is used to understand how the performance of the portfolio was affected by different factors, such as individual security selection, sector allocation, and market movements. This information can be used to identify the specific decisions and strategies that contributed to the portfolio’s overall performance, and can help inform future investment decisions.

Additionally, performance attribution can also be used by investors and portfolio managers to evaluate the effectiveness of their investment strategies and make adjustments as needed.