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Abstract

A method for arithmetic performance attribution which accurately links single-period attribution effects over multiple periods. In preferred embodiments, the method determines portfolio relative performance over multiple time periods (t=1, 2, . . . , T) as a sum of terms of form.times..times..times..times..times..times..times..times..times. ##EQU00001## where a.sub.it is a component of active return for period t, the summation over index i is a summation over all components a.sub.it for period t,.times..times..times..times..times..times..times..times..times..times..-times. ##EQU00002## R.sub.t is a portfolio return for period t, R.sub.t is a benchmark return for period t, and the coefficients c.sub.1 and c.sub.2 are c.sub.1=A, and.times..times..times..times..times..times..times..times..times..times.-.times. ##EQU00003## More generally, the invention is an arithmetic method for determining portfolio relative performance over multiple time periods (t=1, 2, . . . , T) as a sum of terms of form:.times..times..times..infin..times..times..times..times. ##EQU00004## where a.sub.it is a component of active return for period t. In preferred quadratic implementations (in which the only nonzero coefficients c.sub.k are those for which k=1 or k=2), the coefficients c.sub.1 and c.sub.2 are defined as in the above-mentioned preferred embodiments. In all embodiments, the method of the invention is metric preserving at the component portfolio level. Other aspects of the invention are a computer system programmed to perform any embodiment of the inventive method, and a computer readable medium which stores code for implementing any embodiment of the inventive method.

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First Claim