ST5 September 2016 Q7 - performance attribution

I am trying to calculate the sector selection for Q7 of the September 2016 past paper but can't work it out.

I have calculated the stock selection so I am able to work out what the sector selection is just be taking the stock selection away from the Total Fund out performance in each year.

However, if I was wanting to calculate the sector selection from first principles, how would I do this? I have tried this using the normal formula for sector selection but I haven't been able to get the correct answers of 0.18% for Year 1 and 0.21% for Year 2.

Any help would be appreciated thanks!

 

I am having difficulty with this question - for the stock selection for equities I am using the formula: actual % invested x (actual return - benchmark return) giving me for Year 1: 62.5% x (9.92% - 8.67%) = 0.781% and similarly for fixed income for year 1 I get: 32.5% x (2.92% - 4%).
Then for sector performance I use the formula of (actual % allocation - benchmark % allocation) x (benchmark return of the asset - benchmark return of the fund) and get for Year 1: (62.5% - 60%) x (8.67% - 6.8%) + (32.5% - 40%) x (4% - 6.8%) = 0.26%

 

Hi,
I have corrected that error but I am still not getting the right answers for this. I am confused by the phrasing of the question to be honest. For the stock selection of the equities, for Year 1, I am getting 0.625 x (9.92% - 8.67%) = 0.78% - the solution shows 1%. This is just the actual % invested x (actual return - benchmark return).
I am calculating the stock selection for bonds in a similar way and again, this is not working out. For Year 1 I have 0.325 x (2.9% - 4%).
For the sector asset allocation, now including the cash, I am also not getting the right answer. The numbers I have for Year 1 are: (0.625 - 0.6) x (8.67% - 6.8%) + (0.325 - 0.4) x (4% - 6.8%) + (0.05 - 0) x (0% - 6.8%) = -0.08%

 

Can somebody please post their working here? My answers just don't seem to tally with that given in the examiners report.

Thanks.

 

"[For the stock selection of the equities, for Year 1, I am getting 0.625 x (9.92% - 8.67%) = 0.78% - the solution shows 1%. This is just the actual % invested x (actual return - benchmark return)]"

Can I ask why you have done this? The Core Reading suggests that stock selection profit should be actual % invested * (actual sector return - NOTIONAL sector return) ?

 

Hi I was working through and marking myself on this exam paper. When attempting this question I calculated value added from stock selection/sector selection in terms of millions of dollars. I notice that in the examiner's report the solution is instead given in percentages. Is it necessary to give the answer in percentages or would I have achieved full marks for my approach? Thanks.

 

Fantastic thanks

 

hi
i cannot understand why we put the last table in the solution where we show the value added forvexample equities (0.72) when in the previous table we show for equities 0.07. whta confuses me is that before both tables the solutuon mentions

" the table shows the value added by sector asset alloc decisions"

in addition i dont get at which point we are asked to give both tables?
1st and 2nd bullet table 3 in solution
4th bullet 2nd table and answer 0.59
3rd bullet: 4th or 5th table?

 

what i am trying to understand is where the solution ends at revision notes ? i think the last table is not requested from the solution as it has already been answered in the previous one.

 

thanks. this was my understanding.

 

I meet one question on attribution analysis. 2016 Sep Q7.

I tried the calculations on the excel, while I have not achieved the same number as the solution for benchmark value at end year 2. If the solutions are produced by excel, then the result shall be same. I agree with the solution that the benchmark value at the end of year 1 is 213.6. Considering the 60 disinvestment and the components within the benchmark portfolio are equally weighted, then the investment in each components is 30.7. In that case, the emerging market equities within the benchmark at the end of year 2 shall be 33.48, without loss of accuracy. While the model solution is 33.6374.

I did not find a way to upload my excel calculations here. If there is way, very happy to know.

Also, the last part of the solution mentioned that “Asset allocation – has added minimal value over the period.” I do not understand this, since sector selection provides a return about 0.18% in the first year and 0.21% in the second year. And it provides a better result that stock selection. So what does asset allocation mean here?

Many thanks.