A Unified Frame Work for Performance and Risk Attribution

Abstract

Investment performance evaluation is one of the pillars of finance and its techniques have refined throughout the years. This work focuses on the evaluation of the investment performance achieved through a top-down investment strategy analyzed using the Brinson model: a set of techniques that permits to algebraically examine the performance contributions of the investment decisions taken. The model, that originated in 1985, has been constantly refined throughout the years to overcome some of its major problems. In particular, this work analyzes the improvements that permit to apply the Brinson model to a multi-period timeframe and to a risk analysis process. Lastly, this work will present a new approach that adapts the Brinson model to a multi-period timeframe. This new approach refines some of the tools presented in the literature and analyzes the investment decisions from a risk-return perspective rather than a return-only perspective.