Equity Return Attribution: Brinson-Hood-Beebower Model
Consider the following Sector C analyzed in the Brinson-Hood-Beebower model:
| Sector | Portfolio Weight | Benchmark Weight | Portfolio Return | Benchmark Return |
|:-----:|:-----:|:-----:|:-----:|:-----:|
| C | 0.3 | 0.4 | 9% | 6% |
What is the interaction allocation effect attributed to the manager for this sector?
Correct!
Incorrect.
The interaction effect is calculated as the product of the weight difference and the return difference. In this case:
>$$ (0.3 - 0.4) \times (9 \% - 6 \%) = -0.3 \%$$.
Other responses
-0.3
