A New Choice in Multi-Period Investment Performance Attribution: Effective Return Vs. Geometric

$25

An ongoing challenge in multi-period performance attribution is getting numbers to add that do not add naturally. Specifically, the benchmark return plus the sum of attributed effects (like selection and allocation) should equal the reported return.  In [Surz, 2010], I introduced a new method called “effective return” that produces the desired relationship by solving for component returns whose weighted sum equals the known rate of return.

Author: Ronald J. Surz, PPCA, Inc.

A New Choice in Multi-Period Investment Performance Attribution: Effective Return Vs. Geometric

An ongoing challenge in multi-period performance attribution is getting numbers to add that do not add naturally. Specifically, the benchmark return plus the sum of attributed effects (like selection and allocation) should equal the reported return.  In [Surz, 2010], I introduced a new method called "effective return" that produces the desired relationship by solving for component returns whose weighted sum equals the known rate of return.

Free Subscription!

The Journal of Performance Measurement

The Performance Measurement Resource.

Click to Subscribe