Definition
Attribution analysis decomposes portfolio performance into factors explaining returns. It identifies whether outperformance came from asset allocation (sector weights), security selection (stock picking), or interaction effects. This helps investors understand what drove results and whether the manager's stated strategy matches actual behavior.
Formula
Example
Attribution shows 60% of a fund's outperformance came from overweighting tech (allocation) and 40% from picking better tech stocks (selection).
FAQ
What is Attribution Analysis?
Breaking down portfolio returns into their component sources.
How do you calculate Attribution Analysis?
A common formula for Attribution Analysis is: Total Return = Allocation Effect + Selection Effect + Interaction Effect
Why is Attribution Analysis important?
Attribution Analysis helps investors evaluate portfolio management and make more informed decisions.