Answer :
Currency selection :
EAFE / Manager weight * Currency appreciation ( E1 / E0 - 1 )
EAFE : [ 0.6 * ( 1.2 - 1 ) ] + [ 0.2 * ( 0.55 - 1 ) ] + [ 0.2 * ( 1.4 - 1 ) ] = 11.00%
Manager : [ 0.7 * ( 1.2 - 1 ) ] + [ 0.1 * ( 0.55 - 1 ) ] + [ 0.2 * ( 1.4 - 1 ) ] = 17.50%
6.50% profit relative to EAFE
Country selection :
EAFE/ Manager weight × Return on Equity Index
EAFE : [ 0.6 * 18% + 0.2 * 18% + 0.2 * 23% ] = 19.00%
Manager : [ 0.7 * 17% + 0.1 * 18% + 0.2 * 18% ] = 17.30%
1.70% loss relative to EAFE
Stock selection :
( Manager’s return - Return on Equity Index ) × Manager weight
[ ( 17% - 18% ) * 0.7 ] + [ ( 18% - 18% ) * 0.1 ] + [ ( 18% - 23% ) * 0.2 ] = -1.70%
1.70% loss relative to EAFE
Calculate the contribution to total performance from currency, country, and stock selection for the manager in...
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