Research shows asset allocation decisions explain approximately 90% of the variation in portfolio returns, whereas individual security selection explains only about 10%.

Question

Quizplus · Accepted Answer

This statement is based on studies like the Brinson, Hood, and Beebower (BHB) study, which found that asset allocation is the primary determinant of a portfolio's return variability over time, rather than individual security selection.

Research Shows Asset Allocation Decisions Explain Approximately 90% of the Variation