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5. During the family gathering, you were comparing your investment to your cousin's. Last year you invested 70% on equity (return rate 11%) and 30%
5. During the family gathering, you were comparing your investment to your cousin's. Last year you invested 70% on equity (return rate 11%) and 30% on bonds (return rate 7%), while your cousin invested 50% on equity (return rate 10%) and 50% on bonds (return rate 6%). a) How much did your investment portfolio outperform/underperform your cousins? b) Use attribution analysis, calculate the allocation advantage (A), selection advantage (S), and the interaction advantage (I). Formula Sheet For Help -rf -rf o 1) Sharpe measure S=- 2) Treynor measure T= B 3) Jensen measure: a = -E(r) where E(r)=r;+B[E(1M)=r;] = 4) MP and T measure Asset A relative to Asset B (B as the benchmark) M=(SA-SBOB S for Sharpe ratio T2=(TA-TB)BB T for Treynor ratio
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