Which ofthe following statements regarding performance attribution and performance analysis is correct?
A. Performance attribution analysis is used to determine statistical significance of information ratios.
B. Performance analysis focuses on portfolio returns over a single period.
C. Portfolio-based performance analysis is based on a top-down approach inwhich realized retums are attributed to various components.
D. Portfolio-based analysis involves a two-step process. Realized returns are attributed to various components in a single period and then performance analysis examines die attributed retums to determine whether the manager added value.
Answer:D
lt is performance analysis and not the attribution analysis which is used to determine statistical significance of information ratios. lt is performance attribution analysis and not performance analysis which focuses on portfolio returns over a single period. It is returns-based performance analysis and not portfolio-based analysis which is based on a top-down approach.