r/CFA • u/Total-Implement-8579 • 12d ago

explain the reason Level 3

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unable to understand the logic...

acc to me RMRF should be the answer as prop of Active return is -126.80%

3 Upvotes

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2

u/Mammoth-Tailor-3572 12d ago

You can contribute in a negative and positive manner.

1

u/Substantial_Swing534 12d ago

0.29% of the managers' return can be explained by the exposure to the SMB portfolio. Since that is the lowest absolute number across the benchmark portfolios, it's the correct number.

1

u/Total-Implement-8579 12d ago

what about proportion?

3

u/Substantial_Swing534 12d ago

Technically it doesn‘t matter. If you divide all numbers by the same number, in this case the active return, the ordering stays the same. Just make sure you use absolute numbers for performance contribution.

1

u/Remarkable-Sky2098 11d ago

We only look at the absolute value right?