The manager of Quantitative International Fund uses EAFE as a benchmark. Last year's performance for the fund and the benchmark were as follows: $\begin{array}{c}
\begin{array}{lll}
\text { } \
\text { } \
\text { } \
\text { Eur } \
\text {Aus } \
\text {FE } \
\end{array}
\begin{array}{c}
\text { } \
\text { } \
\text { EAFE Welght } \
\text { 0.30 } \
\text { 0.10} \
\text { 0.60} \
\end{array}
\begin{array}{c}
\text { } \
\text { Return on } \
\text {Equity Index } \
10\%\
5\%\
15\%
\end{array}
\begin{array}{c}
\text {Currency } \
\text {Aplication } \
E_{1} / E_{0.1} \
10\%\
-10\%\
30\%
\end{array}
\begin{array}{c}
\text { } \
\text { Quantitative's } \
\text { Welght} \
0.25\
0.25\
0.50
\end{array}
\begin{array}{c}
\text { } \
\text { } \
\text {Manager's Return } \
9\%\
8\%\
16\%
\end{array}
\end{array}$
Calculate Quantitative's stock selection return contribution.

Question

The manager of Quantitative International Fund uses EAFE as a benchmark. Last year's performance for the fund and the benchmark were as follows: $\begin{array}{c}
\begin{array}{lll}
 \text {  } \
 \text {  } \
 \text {  } \
 \text { Eur } \
 \text {Aus  } \
 \text {FE  } \
\end{array}
\begin{array}{c}
 \text {  } \
 \text {  } \
 \text {  EAFE Welght } \
 \text { 0.30 } \
 \text {  0.10} \
 \text {  0.60} \
\end{array}
\begin{array}{c}
 \text {  } \
 \text { Return on  } \
 \text {Equity Index  } \
10\%\
5\%\
15\%
\end{array}
\begin{array}{c}
 \text {Currency  } \
 \text {Aplication  } \
  E_{1} / E_{0.1} \
10\%\
-10\%\
30\%
\end{array}
\begin{array}{c}
 \text {  } \
 \text { Quantitative's } \
 \text {  Welght} \
0.25\
0.25\
0.50
\end{array}
\begin{array}{c}
 \text {  } \
 \text {  } \
 \text {Manager's Return  } \
9\%\
8\%\
16\%
\end{array}
\end{array}$
 Calculate Quantitative's stock selection return contribution.

Quizplus · Accepted Answer

The stock selection return contribution is the difference between the manager's return and the benchmark return, weighted by the manager's weights. In this case, the manager's return is 9%, 8%, and 16%, and the benchmark return is 10%, 5%, and 15%. The manager's weights are 0.25, 0.25, and 0.50. So, the stock selection return contribution is (9% - 10%) * 0.25 + (8% - 5%) * 0.25 + (16% - 15%) * 0.50 = 1.0%.

The Manager of Quantitative International Fund Uses EAFE as a Benchmark