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Position or transaction based attribution

2. Agenda. Do we need transaction based attributionMethodologyMoney Weighted Return vs Time Weighted ReturnAverage Invested CapitalImpact on data requirements. 3. Questions. Why do we need transaction based attribution?To enhance the accuracy of the resultsDISCUSSIONIs it better than daily po

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Position or transaction based attribution

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    1. 1 Position or transaction based attribution Philippe Grgoire Orfival

    2. 2 Agenda Do we need transaction based attribution Methodology Money Weighted Return vs Time Weighted Return Average Invested Capital Impact on data requirements

    3. 3 Questions Why do we need transaction based attribution? To enhance the accuracy of the results DISCUSSION Is it better than daily position based attribution? Yes, as long as the portfolio is not rebelanced on a daily basis (which is usually the case for portfolios that do not track the index) DISCUSSION

    4. 4 MWR vs TWR

    5. 5 MWR vs TWR

    6. 6 Weights To measure the impact of an allocation decision, we compare the weights of the benchmark and the portfolio If the portfolio is rebalanced periodically, we take the benchmarks weights at the start of the period MWR are computed over the period and then linked through a TWR What weights should we used for transaction based attribution DISCUSSION

    7. 7 Average Invested Capital

    8. 8 Conclusions Key points in transaction based attribution MWR AIC How to determine the period? Rebalancing period A consequence is that we do not need daily data for benchmarks!!!!

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