In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments in asset classes: $\begin{array}{cc}
& \text { Weight } & \text { Return }\
\text { Bonds } &20\%&5\%\
\text { Stocks } &80\%&0\%\
\end{array}$

The return on a bogey portfolio was 2%, calculated from the following information.
$\begin{array}{cc}
& \text { Weight } & \text { Return }\
\text { Bonds (Lehman Brother Index) } &50\%&5\%\
\text { Stacks (S\&P 500 Index) } &50\%&-1\%\
\end{array}$

The contribution of asset allocation across markets to the Hoosier Fund's total abnormal return was
A) 1.80%.
B) 1.00%
C) 0.80%.
D) 1.00%.

Question

In a particular year, Hoosier Mutual Fund earned a return of 1% by making the following investments in asset classes: $\begin{array}{cc}
&  \text { Weight  } & \text { Return }\
 \text { Bonds } &20\%&5\%\
 \text { Stocks } &80\%&0\%\
\end{array}$

The return on a bogey portfolio was 2%, calculated from the following information.
$\begin{array}{cc}
&  \text { Weight  } & \text { Return }\
 \text { Bonds (Lehman Brother Index) } &50\%&5\%\
 \text { Stacks (S\&P 500 Index) } &50\%&-1\%\
\end{array}$

The contribution of asset allocation across markets to the Hoosier Fund's total abnormal return was
A) 1.80%.
B) 1.00%
C) 0.80%.
D) 1.00%.

Quizplus · Accepted Answer

The contribution of asset allocation across markets to the Hoosier Fund's total abnormal return is 1.80%. This is calculated by taking the difference between the Hoosier Fund's return and the bogey portfolio's return, and then multiplying this difference by the weight of the asset class in the Hoosier Fund's portfolio. In this case, the difference between the Hoosier Fund's return and the bogey portfolio's return is 1% - 2% = -1%. The weight of the asset class in the Hoosier Fund's portfolio is 80%. Therefore, the contribution of asset allocation across markets to the Hoosier Fund's total abnormal return is -1% * 80% = -0.80%.

In a Particular Year, Hoosier Mutual Fund Earned a Return Weight Return Bonds 20%5% Stocks 80%0%\begin{array}{cc}& \text { Weight } & \text { Return }\\ \text { Bonds } &20\%&5\%\\ \text { Stocks } &80\%&0\%\\\end{array} Bonds Stocks ​ Weight 20%80%​ Return 5%0%​

In a Particular Year, Hoosier Mutual Fund Earned a Return $\begin{array}{cc}& \text { Weight } & \text { Return }\\ \text { Bonds } &20\%&5\%\\ \text { Stocks } &80\%&0\%\\\end{array}$