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USING MULTIFACTOR MODELS - Coggle Diagram
USING MULTIFACTOR MODELS
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Return attribution
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Factor return: arising from the manager’s decision to take on factor exposures that differ from those of the benchmark
Security selection: arising from the manager choosing a different weight for specific securities compared to the weight of those securities in the benchmark
Risk Attribution
Active factor risk: Risk from active factor tilts attributable to deviations of the portfolio’s factor sensitivities from the benchmark’s sensitivities to the same set of factors.
Active specific risk: Risk from active asset selection attributable to deviations of the portfolio’s individual asset weightings versus the benchmark’s individual asset weightings.
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