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L. 1'1 Llll. IEICIIL-C III 1 I334. prnrrrurrra Use the following information to answer problems 1321: Primo Management Co. is looking at how best to

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L. 1'1 Llll. IEICIIL-C III 1 I334. prnrrrurrra Use the following information to answer problems 1321: Primo Management Co. is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about bench mark portfolios and is interested in trying this approach. Consequently, the company hired Sally Jones, CFA, as a consultant to educate the managers on the best methods for oonstructing a bench mark portfolio, how best to choose a benchmark, whether the style of the rnd under management matters, and 1I.vhat they should do 1with their global funds in terms of benchmarking. For the sake of discussion, Jones put together some comparative twoyear performance numbers that relate to Primo's current domestic funds under management and a potential benchmark. Welght Helum ['15] Style Category Benchmark Prlmo Benchmark Largecap growth Mldcap growth Smallcap growth As part of her analysis, Jones also takes a look at one of Primo's global funds. In this particular portfo lio, Primo is invested T5 percent in Dutch stocks and 2.5 percent in British stocks. The benchmark in vested 5D percent in eachDutch and British stocks. On average, the British stocks outperformed the Dutch stocks. The euro appreciated IS percent versus the US. dollar over the holding period while the pound depreciated 2 percent versus the dollar. In terms of the local return, Primo outperformed the benchmark with the Dutch investments, but underperformed the index with respect to the British stocks. 13. What is the withinsector selection effect for each individual sector? 19. Calculate the amount by which the Primo portfolio out {or under)performed the market over the period, as well as the contribution to performance of the pure sector allocation and security selec tion decisions. II]. If Primo decides to use retum-based style analysis, will the R2 of the regression equation of a pas

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