Practical Portfolio Performance Measurement and Attribution, Second Edition

1

Irving Fisher (1867-1947) president of the American Statistical Association in 1932, not to be confused with Sir Ronald Aylmer Fisher (1890-1962) Professor of Genetics at University College London 1943-1957.

2

The “emperical or 68-95-99.7” rule; actually more accurately 68.2689%, 95.4499% and 99.7300%.

3

H.E. Hurst originally developed the Hurst index to help in the difficult task of establishing optimal water storage along the Nile. Nile floods are extremely persistent as evidenced by a Hurst index of 0.9. Equity markets have a Hurst index of around 0.7. See Clarkson (2001).

4

In fact the original Brinson, Hood and Beebower article does not attempt to attribute returns to individual categories. In all likelihood I do not believe the authors intended their top-level formulae to be applied to individual categories as shown; however, over the years many practitioners have done just that.

5

In their original 1994 paper Karnosky and Singer used a Brinson, Hood and Beebower approach. I’ve used Brinson and Fachler since it is more relevant to the way most asset managers manage money.

6

WM Reuters 4 o’clock London close.

7

McLaren provides a choice of which factor to impact determined by the order of the investment decision process.

8

Note that the interest rate differentials of sterling against the yen and US dollar are: Yen 1.10/1.0887 – 1 or 0.97/0.96 – 1 = 1.04% (UK interest rates 1.04% higher than Japan) US $ 1.20/1.1782 – 1 or 1.1/1.08 – 1 = 1.85% (UK interest rates 1.85% ...