tag:blogger.com,1999:blog-2568941354104807757.post3999362577585914809..comments2023-10-05T09:07:24.225-04:00Comments on Investment Performance Guy: Attribution: a matter of perspectiveDave Spauldinghttp://www.blogger.com/profile/01777929408680234896noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2568941354104807757.post-51855172730930542132011-04-08T10:12:25.953-04:002011-04-08T10:12:25.953-04:00Andreas, thanks for the follow up.
As for standar...Andreas, thanks for the follow up.<br /><br />As for standardization, I DO support it, but not from a highly prescriptive perspective (that word again), but rather from a DISCLOSURE one; that is, to indicate HOW the firm does attribution which MODEL they use, whether it's TRANSACTION or HOLDINGS based, etc. I think there's value in this. Given the multitudinous ways and options available, some disclosures are in order.Dave Spauldinghttps://www.blogger.com/profile/01777929408680234896noreply@blogger.comtag:blogger.com,1999:blog-2568941354104807757.post-29733505480387023262011-04-08T08:28:55.544-04:002011-04-08T08:28:55.544-04:00I fully agree with you that flexible attribution s...I fully agree with you that flexible attribution systems are needed. Too many currently available systems do lack flexibility. I think that flexibility is needed to custom-tailor an analysis to real-world investment processes. The number of "different" perspectives is unlimited; I do not value them as highly as you do. On the other hand, I do value highly differing "perspectives" when it comes to factor models.<br />My answer is also motivated by the fact that I do not agree to the prevailing "relativist" attitude in performance & risk analysis: not all risk-adjusted performances are created equal, not all performance attribution breakdowns are meaningful. It does not follow that there exist "single best" solutions. What is needed is guidance on which methodologies make sense in which context. Critera to choose the "more appropriate" methodologies do exist.<br />I am also very much opposing standardization: competition is what motivates people to come up with ever-better solutions. Standardiation typically results in reversion to the minimum, which is not in the interest of the client when it comes to performance and risk information.Andreas Steinerhttp://www.andreassteiner.net/performanceanalysisnoreply@blogger.comtag:blogger.com,1999:blog-2568941354104807757.post-31135548614333656102011-04-07T15:03:40.651-04:002011-04-07T15:03:40.651-04:00Andreas, thanks for your input. I have two thought...Andreas, thanks for your input. I have two thoughts on this: #1, I agree that there technically only one "correct" perspective, which aligns with how the portfolio is managed. However, it is also often helpful to look at the portfolio from DIFFERENT perspectives, to gain insights into what is going on. Flexible attribution systems, which provide the firm the ability to "slice and dice" their numbers, to look at things from different angles (perspectives) can be quite beneficial. A manager (and their clients) can learn a lot about what's going on, by looking at the portfolio in different ways.Dave Spauldinghttps://www.blogger.com/profile/01777929408680234896noreply@blogger.comtag:blogger.com,1999:blog-2568941354104807757.post-4693474987645885022011-04-07T08:02:14.177-04:002011-04-07T08:02:14.177-04:00Dave, you raise an interesting point. I am very pa...Dave, you raise an interesting point. I am very particular about it: There exists only one "correct" perspective in performance attribution - the one the decision makers had ex ante. Performance attribution is about attributing ex post results to ex ante decisions. If we take the wrong perspective ex post, we get results that are not meaningful: a country breakdown doesn't make sense for a portfolio that is managed according to sectors.<br />Most of the time, the "one-dimensional" breakdown in your calculations is applicable. In most real-world portfolios, decisions are simutaneously accross varios dimensions (countries and sectors). There exist performance attribution "models" that can produce meaningful results for such portfolios. I talk about them in my Performance Attribution seminar.Andreas Steinerhttp://www.andreassteiner.net/performanceanalysisnoreply@blogger.com