Process Attribution: Revisiting Equity Attribution and Decision Making

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It is often said that attribution should mirror the investment decision making process if it is to be useful in providing feedback to its participants. This paper argues, however, that the decision to hold a certain security at a certain weight, and the resulting asset allocation/stock selection effects, are actually the outcome of myriad decision-points, and that much is to be gained from understanding the process by which these positions are actually arrived at.

Andrew Kophamel, CFA

Ben Wang, Ph.D.

It is often said that attribution should mirror the investment decision-making process if it is to be useful in providing feedback to its participants. This paper argues, however, that the decision to hold a certain security at a certain weight, and the resulting asset allocation/stock selection effects, are actually the outcome of myriad decision-points, and that much is to be gained from understanding the process by which these positions are actually arrived at. Process attribution offers a simple and intuitive framework to supplement existing attribution techniques, providing a more longitudinal view of a portfolio and its construction. This paper reintroduces the topic and demonstrates how it may be useful for analysts, portfolio managers and CIOs alike.

Process Attribution: Revisiting Equity Attribution and Decision Making

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