Performance Attribution Analysis

Performance attribution analysis, or performance attribution, seeks to determine how much a fund’s P&L is due to exposure to various risk factors (see factor analysis). For a long-short equity fund, for example, we might want to know how much of the fund’s P&L over the past year was due to market exposure, how much to being over/under weight different sectors, and how much can be attributed to alpha.

There are two basic approaches to performance attribution analysis, ex ante and ex post. Ex post is easier to compute, but only works over long-horizons and for simple, stable strategies. Ex ante analysis is more complicated to perform, but can be more accurate and can be performed daily.


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