PT  - JOURNAL ARTICLE
AU  - Tommi Johnsen
AU  - Donald J Nesbitt
TI  - A Framework for Factor Return Attribution
AID  - 10.3905/JOI.2009.18.1.059
DP  - 2009 Feb 28
TA  - The Journal of Investing
PG  - 59--68
VI  - 18
IP  - 1
4099  - https://pm-research.com/content/18/1/59.short
4100  - https://pm-research.com/content/18/1/59.full
AB  - 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’s realized excess returns to the manager’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’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’s excess returns.TOPICS: Portfolio management/multi-asset allocation, factors, risk premia, factor-based models