performance-attribution

Portfolio excess returns are decomposed using the Brinson-Fachler statistical model to quantify the specific contributions of sector allocation and stock selection against a defined benchmark. This isolates exactly where outperformance or underperformance originates.

Factor alpha and beta decomposition uses regression analysis to isolate genuine manager skill, or alpha, from systematic market exposure, or beta. This helps distinguish whether returns stem from strategic asset selection or broader market risk factors.

Market timing effectiveness is evaluated by employing Treynor-Mazuy and Henriksson-Merton statistical models to assess tactical timing decisions. These models measure how successfully a manager adjusts market exposure relative to benchmark movements.

Outperformance is proven by calculating risk-adjusted performance metrics using Fama-French models to separate alpha from beta exposure. This demonstrates that excess returns derive from superior stock selection rather than simply taking on higher market risk.

Performance attribution against a benchmark requires historical return data for the portfolio and the corresponding benchmark indices. This data feeds statistical models to calculate style drift and evaluate risk-adjusted performance metrics.