Stock level attribution formula
Bottom-Up Attribution (Stock-Level Attribution) Bottom-up attribution model is appropriate to analyze a portfolio manager who focuses on security selection. In this model, the selection effect is considered primary and the allocation effect is secondary. The answer, it turns out, can lie in three levels of Brinson attribution – Allocation, Selection, and Interaction. Let’s look at each in turn to see why this method can add insights. Today's approaches to Component level attribution are based on concepts presented in a study2 by Brinson and Fachler (BF) in 1985. In this article, the impact of weighting decision for a particular group j is defined as ( B B) j B j P wj −w • R −R. The (B) j P wj −w portion of this formula is the same as the equation for the tactical asset