@article {Johnsen59, author = {Tommi Johnsen and Donald J Nesbitt}, title = {A Framework for Factor Return Attribution}, volume = {18}, number = {1}, pages = {59--68}, year = {2009}, doi = {10.3905/JOI.2009.18.1.059}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Performance analysis of the returns provided by an actively managed portfolio is increasingly viewed as a tool not only to assess manager skill and how it adds value, but also as a basis for a discussion about the alpha factors present in an active investment strategy. We review a popular form of the most traditional of return attribution approaches and demonstrate how it fails to link the portfolio{\textquoteright}s realized excess returns to the manager{\textquoteright}s stated strategy and neglects the effect of extraneous risk exposures. As an alternative, we provide a framework for producing performance attribution that captures a risk-adjusted factor approach, which seeks to separate and identify the particular factors that drive a manager{\textquoteright}s investment process. We believe that a better assessment of the management process can be accomplished by measuring and separating these factors and accounting for their contribution to the portfolio{\textquoteright}s excess returns.TOPICS: Portfolio management/multi-asset allocation, factors, risk premia, factor-based models}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/18/1/59}, eprint = {https://joi.pm-research.com/content/18/1/59.full.pdf}, journal = {The Journal of Investing} }