QFIP-145: Determinants Of Portfolio Performance

Question 1

According to the reading QFIP-145-19: Determinants of Portfolio Performance, what
explains the vast majority of portfolio returns?

Answer 1

The study found that the investment policy return explains the vast majority (¡ 90%) of
the total variation in the returns of different funds

Question 2

According to the reading QFIP-145-19: Determinants of Portfolio Performance, list the
four different quadrants of portfolio return

Answer 2

1. Policy Return (Passive Portfolio Benchmark):
   Return
   ¸n
   i1
   
   Wpi Rpi
2. Policy and Timing Return
   Return
   ¸n
   i1
   
   Wai Rpi
3. Policy and Security Selection Return
   Return
   ¸n
   i1
   
   Wpi Rai
4. Actual Portfolio Return
   Return
   ¸n
   i1
   
   Wai Rai