by Gary P. Brinson, Brian D. Singer and Gilbert L. Beebower. Determinants of Portfolio. Performance II: An Update. This article presents a framework for. This study examines the total return of investment portfolios composed of mutual The results of Brinson, Hood and Beebower () and Brinson, Singer and. results of Brinson, Hood and Beebower () and Brinson, Singer and Beebower the variation in total portfolio return, and that tactical timing decisions and.

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A question for those who have access to old issues of the Financial Analysts Journal and might be interested: It would tell us that asset allocation determines percent of portfolio performance and that none of performance is determined by security selection.

Question Re: “Determinants of Portfolio Performance” Debate

Here is a discussion about that: Academic studies InGary P. Randolph Hood, and Gilbert L.

Beebower BHB published a study about asset allocation of 91 large pension funds measured from to A follow-up study by Brinson, Singer, and Beebower measured a variance of Also, a small number of asset classes was sufficient for financial planning. However, in response to a letter to the editor, Hood noted that the returns series were gross of management fees. However, the difference is still 15 basis points hundredths of a percent per quarter; the difference brinwon one of perception, not fact.

Ibbotson and Kaplan examined the 10 year return of 94 Determinabts balanced mutual funds versus the corresponding indexed returns. This time, after properly adjusting for the cost of running index funds, the actual returns again failed to beat index returns. The linear correlation between monthly index return series and the actual monthly actual return series was measured at Gary Brinson has expressed his general agreement with the Ibbotson- Kaplan conclusions.


Question Re: “Determinants of Portfolio Performance” Debate | AnalystForum

Statman says that strategic asset allocation is movement along the efficient frontier, whereas tactical asset allocation involves movement of the efficient frontier. Hood notes in his review of the material over 20 years, however, that explaining performance over time is possible with the BHB approach but was not the focus of the original paper.

Bekkers, Doeswijk and Lam investigate the diversification benefits for a portfolio by distinguishing ten different investment categories simultaneously in a mean-variance analysis as well as a market portfolio approach.

The results suggest that real estate, commodities, and high yield add most value to the traditional asset mix of stocks, bonds and cash. A study with such a broad coverage of asset classes has not been conducted before, not in the context of determining capital market expectations and performing a mean-variance analysis, neither in assessing the global market portfolio.

Any help with the question Determinats asked in my initial post would be much appreciated. They attributed the residual return to security selection.

Now the example considered stock A with returns for each period equal to those of bond A, stock B with returns for each period equal to those of bond B and returns of A are double of returns of B. In other words, if x is perrformance series for stock B.


As a result for any asset weights the corresponding asset-allocation index would be 1. Now if manager A invests in stock A and Bond A, while manager B invests in stock B and bond B, asset allocation has nothing to do with returns because any combination of stock A and bond A gives 2x, any combination of stock B and bond B gives x.

Asset allocation

However, when you regress x or 2x on 1. Here is what the author concludes: We may be tempted to conclude that the different performances should be attributed to asset allocation, because the managers have different betas, but this conclusion would be false.

BHB did not adjust performance for risk. Moreover, the differences in betas arise from the choice of portfolil, not asset classes as BHB defined these categories. Thanks for the response.

Asset allocation – Wikipedia

I may never learn to do my own homework if you keep playing the role of enabler though. Skip to main content.

Be prepared with Kaplan Schweser. Anonymous Sep 21st, Study for Success in It seems to be a popular topic. Deleted User Sep 24th, I will asnwer your question but you should do your homework yourself. Deleted User Sep 24th, 3: No thanks, I don’t want to increase my probability of passing.