How the allocation effects are measured

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Reference no: EM13923339

Performance attribution analysis is an attempt to divide a manager's "active" residual return into an allocation effect and a selection effect. Explain how these two effects are measured and why their sum must equal the total value-added return for the manager. Is this analysis valid if the actual portfolio in question is riskier than the benchmark portfolio to which it is being compared?

Reference no: EM13923339

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