The following table summarizes the results:
|
Sector
|
Weight |
Local Currency Return |
Market
Allocation |
|
Portfolio |
Benchmark |
Portfolio |
Benchmark |
|
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
|
European Equity |
50% |
75% |
13.50% |
15.00% |
-3.75% |
|
Japanese Equity |
50% |
25% |
12.00% |
8.00% |
2.00% |
|
Total |
100% |
100% |
12.75% |
13.25% |
-1.75% |
Column (6) computes the market allocation effect for each sector as follows:
Market allocation effect for European Equity = (0.5-0.75) × (15) = -3.75%
Market allocation effect for Japanese Equity = (0.5-0.25) × (8) = 2.00%
Total market allocation effect = -3.75% + 2.00% = -1.75%
