Macro Attribution Components

[MissYiota]

What to know exactly regarding macro attribution performance analysis?
I saw a mnemonic somewhere about a NRABIA

 

[jamespeer]

Net Contributions
Risk Free Asset
Asset Categories
Benchmarks
Investment Manager Selection
Allocation Effects (Plug)

 

[MissYiota]

Thanks. What is each component corresponding to? I mean for example, how to get active return? What is allocation effect or risk free asset in this context?

 

[MrSmart]

They are all premiums.
Risk free is risk free return
Asset is weight of class in policy * asset return(Rc) - Rfr
Benchmark is misfit return adjusted for benchmark weights (Rb-Rc)
Investor is active return (Ra - Rb)
Allocation is transaction costs, policy weight differences, etc.
They should all sum and cancel each other out, to get to total return, which is end value/beg value - 1

 

[jamespeer]

A question will break down what the incremental return components of each, for example Benchmarks - what is the return if you just invested passively. Risk free - what is the return if just invested in the risk free asset. It is likely you will be asked what the value added is via one of these components, the incremental return. I found the EOC questions really useful when revising this topic

 

[MissYiota]

Went back to the 2015 mock and get it now better.