Fundamental Factor Attribution vs. Returns-Based Style Analysis

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Identify the difference between fundamental factor attribution and returns based style analysis (3 points):
 
Can identify (FFA) additional factors such as growth, financial strength, etc that will generate additional returns?
 
Output will look similar. Both are linear regression against a set of factors
Returns based style analysis regresses the returns of a portfolio against the returns of style indexes to figure out how much exposure, as measured by the coefficients, the fund has to each style index.
Fundamental factor attribution is a method of performance attribution where the primary drivers of returns are specified in the model and then returns of a portfolio are regressed against the model to determine exposure to these drivers.
 
This maybe a dumb question, but I’ll ask anyway.
Is fundamental factor different from holdings based?
 
Correct. Give yourself 3 points.
 
passthismofo Wrote:
——————————————————-
> This maybe a dumb question, but I’ll ask anyway.
>
> Is fundamental factor different from holdings
> based?
Absolutely, the holdings based is reviewing the individual holdings in the portfolio and essentially labeling them by style (simple example Utilities & Financials = Value…..Healthcare & Technology = Growth).
The Fundamental Factor and Returns based are regression based, as mwvt9 points out.
 
Sponge_Bob_CFA Wrote:
——————————————————-
> passthismofo Wrote:
> ————————————————–
> —–
> > This maybe a dumb question, but I’ll ask
> anyway.
> >
> > Is fundamental factor different from holdings
> > based?
>
> Absolutely, the holdings based is reviewing the
> individual holdings in the portfolio and
> essentially labeling them by style (simple example
> Utilities & Financials = Value…..Healthcare &
> Technology = Growth).
>
> The Fundamental Factor and Returns based are
> regression based, as mwvt9 points out.
Thx Sponge. I just went back to my notes to review it. I feel pretty stupid right now, but I guess better now than on saturday.
 
No worries, the fundamental factor model isn’t mentioned as often as the other two.
If you’ve made it to LIII, you’ve earned the right to be above feeling stupid.
 
Sponge_Bob_CFA Wrote:
——————————————————-
> No worries, the fundamental factor model isn’t
> mentioned as often as the other two.
>
> If you’ve made it to LIII, you’ve earned the right
> to be above feeling stupid.
Appreciate the kind words. Cheers!
 
what’s the LOS for fundamental factor attribution, can’t even find it!
 
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