a-2. What was her overperformance or underperformance? (Do not round intermediat

Question

a-2. What was her overperformance or underperformance? (Do not round intermediate calculations. Input all amounts as positive values. Round your answer to 2 decimal places.)

Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager’s portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4.

a-1. What was the manager’s return in the month? (Do not round intermediate calculations. Input all amounts as positive values. Round your answer to 2 decimal places.)

a-2. What was her overperformance or underperformance? (Do not round intermediate calculations. Input all amounts as positive values. Round your answer to 2 decimal places.)

c. What was the contribution of asset allocation to relative performance? (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.)

Actual Return Actual Weight Benchmark Weight Index Return Equity 2.6 % 0.4 0.6 3.1% (S&P 500) Bonds 1.5 0.2 0.1 1.7 (Barclay’s Aggregate) Cash 0.7 0.4 0.3 0.8

Explanation / Answer

Table showing return earned by the manager and market return

Thus

a1) manager's return in month = 1.62%

a2) Underperformed by (2.27%-1.62% ) =0.65%

Statement showing contribution of asset allocation to relative performance

Asset Manger's return Market's return Actual return Weight Return Actual return Weight Return Equity 2.60% 0.4 1.04% 3.10% 0.6 1.86% Bonds 1.50% 0.2 0.30% 1.70% 0.1 0.170% Cash 0.70% 0.4 0.28% 0.80% 0.3 0.240% 1.62% 2.27%

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