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Query ST5,S05,Q9 solution

C

calibre2001

Member
Hi,

This is my first post here, and I've stumbled upon something I don't understand in the above question.

Looking at the Examiner's Report, I'm not able to derive the 'Asset Class Selection' figure.

I know the Stock selection is derived by (Fund Return - Index Return)*Fund

Appreciate your help.
 
Don't have the report in front of me but generally speaking the stock selection profit is as you gave.

The asset selection profit (ie equities/bonds etc) is calculated as

(actual weight in class - benchmark weight in class) *
(benchmark return in class - overall benchmark return)

This is if your "middle" fund is notional stocks in actual weightings

Eg
say your benchmark is 60/40 equity and bond
Benchmark equity is 7%
benchmark bond is 5%
Overall benchmark is .6*7+.4*5 = 6.2
if actual holding is 70/30
asset selection profit to bonds is (.3 - .4 ) *(.05 - .062)

then you could add up all the bits to get the total.
I'm pretty sure this approach worked for that question.
 
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