Managing a range of different types of risk has always been an essential aspect of portfolio management.
Performance attribution aims at explaining the results of a portfolio against a benchmark by a set of attribution effects linked to the various investment decisions. In the classic Brinson-Fachler (BF, 1985) method, each attribution effect measures for a specific decision how much it has contributed to the overall excess return. Although the calculated value of such effect provides very useful insights, an important question remains unanswered: How do these effects relate to the risk management side of each decision?
In this whitepaper ‘A Decision-based Approach to Risk-Adjusted Performance Attribution’, published in the Journal of Performance Measurement and awarded the ‘2024 Peter Dietz Award for ‘Excellence in the Field of Performance Measurement Literature’, Arno Weber proposes an expansion to the classic Brinson method, in which he investigates whether a particular attribution effect was primarily due to taking risk or from a superior allocation or stock-picking process that delivers risk-adjusted outperformance.
Arno Weber is a senior software test analyst and plays a key role in the ongoing development of Ortec Finance’s longstanding investment performance measurement and attribution solution, PEARL.
Access the paper by filling out the form.
Contact
Elske van de Burgt
Managing Director Investment PerformanceRelated Insights
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