Under the performance attribution analysis method,the ____ measures the manager's ability to form specific market segment portfolios that generate superior returns relative to the way in which the comparable market segment is defined in the benchmark portfolio weighted by the manager's actual market segment investment proportions.
A) Selection effect
B) Allocation effect
C) Distribution effect
D) Diversification effect
E) Attribution effect

Question

Quizplus · Accepted Answer

The selection effect measures a manager's ability to select individual securities within a given market segment that outperform the benchmark, and also the ability to avoid underperforming securities. The allocation effect, on the other hand, measures the impact of the manager's decision to underweight or overweight a particular market segment compared to the benchmark. The distribution and diversification effects are not commonly used in performance attribution analysis methods. The attribution effect is a broader term that encompasses both the selection and allocation effects.

Under the Performance Attribution Analysis Method,the ____ Measures the Manager's