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I just hit the same question, found this post through google.S2000magician wrote:
Where, exactly?
Measured importance – has to do with regression …. and how - read up in the book!Quote:
. One might also ask, how important is strategic asset allocation relative to other investment decisions in determining investment results in practice? This empirical question has obvious relevance for budgeting resources effectively.
Not surprisingly, how we interpret and measure “importance” affects any conclu- sions. A classic and frequently cited empirical study is Brinson, Hood, and Beebower (1986). These authors interpreted the importance of asset allocation as the frac- tion of the variation in returns over time attributable to asset allocation, based on regression analysis. In a regression, total variation is the sum of squared deviations from the mean, and the fraction of total variation accounted for by the regression is the coefficient of determination or R-squared. This approach takes the perspec- tive of a single portfolio over time. Brinson et al. concluded that asset allocation explained an average 93.6 percent of the variation of returns over time for 91 large U.S. defined benefit pension plans.
Thank you. Yep, must remember to try different tenses when searching Bookshelf…. the pre-google search engine skills from 20 years agocpk123 wrote:
in the entire chapter on Asset allocation - there is a section (2.3 in my book) – The Empirical Debate on the Importance of Asset Allocation –
Measured importance – has to do with regression …. and how - read up in the book!Quote:
. One might also ask, how important is strategic asset allocation relative to other investment decisions in determining investment results in practice? This empirical question has obvious relevance for budgeting resources effectively.
Not surprisingly, how we interpret and measure “importance” affects any conclu- sions. A classic and frequently cited empirical study is Brinson, Hood, and Beebower (1986). These authors interpreted the importance of asset allocation as the frac- tion of the variation in returns over time attributable to asset allocation, based on regression analysis. In a regression, total variation is the sum of squared deviations from the mean, and the fraction of total variation accounted for by the regression is the coefficient of determination or R-squared. This approach takes the perspec- tive of a single portfolio over time. Brinson et al. concluded that asset allocation explained an average 93.6 percent of the variation of returns over time for 91 large U.S. defined benefit pension plans.