Example 3 A portfolio P and its benchmark portfolio B invest in equities and bonds only. Consider the following data for two consecutive months and show that neither arithmetic contributions nor arithmetic outperformances do add up to arithmetic outperformance: month 1 P B month 2 P B w 7 equities 60 12 50 8 ? 8 ? 9 bonds 40 4 50 3 ? 2 ? 3 wir denoting weights and returns in % a) calculate the weights for month 2 given return and weight data for month 1. b) calculate the performance of P and B for month 1, month 2 and the 2-month period c) calculate the relative contributions of equities and bonds for each month according to the BF model. Note: Present your final results in table form (rows: month and asset class; columns: allocation, selection and interaction) d) show that the relative contributions do not add up to the 2-month arithmetic outperformance