Unified Framework for Performance Attribution in Asset Management

This document is a technical report that presents a unified framework for performance attribution in asset management, integrating both risk and return dimensions. It extends the traditional Brinson approach by incorporating the market price of risk through the Sharpe ratio, allowing for a more comprehensive analysis of performance. The framework decomposes performance into allocation and selection effects, assessing their efficiency using a risk-adjusted alpha similar to Jensen’s alpha. The report discusses the limitations of traditional models that do not account for risk, emphasizing the need for a complete attribution framework that evaluates active management decisions in terms of risk-adjusted performance. It outlines the methodology for risk attribution, detailing how allocation and selection decisions impact the overall risk profile of a portfolio. Additionally, the report compares the proposed model with existing risk-adjusted performance models, highlighting their complementarity. The findings aim to provide asset managers and investors with a deeper understanding of active management efficiency.