Portfolio performance is often decomposed into various subcomponents such as the return due to ________.
I. broad asset allocation across security classes
II. sector weightings within equity markets
III. security selection with a given sector
The decision that contributes most to the fund performance is:
A)I
B)II
C)III
D)All contribute equally to fund performance

Question

Quizplus · Accepted Answer

Broad asset allocation across security classes has the strongest impact on overall portfolio performance as it determines the exposure to different asset classes like equities, fixed income, and alternative investments, which have different risk and return profiles. Sector weightings and security selection have a relatively smaller impact on portfolio performance compared to asset allocation.

Portfolio Performance Is Often Decomposed into Various Subcomponents Such as the Return