Transaction- vs. Holdings-Based Attribution: The Differences Are Bigger Than You Might Think

Investment Risk and Performance Feature Articles
March 2013 | Vol. 2013 | No. 1
Source: CFA Institute
David Spaulding, CIPM

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Summary

Holdings-based attribution models often fail to fully explain a portfolio’s excess return because of the resulting residuals. Even worse, these models may cause misleading results. It’s one thing to notice that an attribution model hasn’t reconciled completely to the excess return; it’s quite another to be told that a decision contributed to performance when it actually detracted from it.

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