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Idiosyncratic Return and Variance Attribution: Observations from the Australian Listed Property Sector
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Idiosyncratic Return and Variance Attribution: Observations from the Australian Listed Property Sector
ASU20101445
Author: Andrew Kophamel, CFA, StateStreet
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It is testament to the simplicity and applicability of orthodox variance attribution that it is so well-grounded in the performance research and practice. However, contained within the familiar asset allocation calculation lurks an implicit but ill-recognized assumption around diversity, and, set against the backdrop of the Australian Listed Property industry, this article demonstrates how, in extremely concentrated asset groupings, large idiosyncratic returns can easily and signficantly distort attribution results.
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