Consider the following performance data for two portfolio managers (A and B) and a common benchmark portfolio: Benchmark Manager A Manager B Weight Return Weight Return Weight Return Stock 0.5 15% 0.6...

1. The return of Manager A is
E (Rp)=W1*E(A)+W2*E(B)+W3*E(C)
= 0.6*20% +0.2*90% + 0.2*4%
= 14.60%
The return for Manager B is
E (Rp)=W1*E(A)+W2*E(B)+W3*E(C)
= 0.4*13%+0.5*10%+ 0.1*2.5%
= 10.45%
2. The benchmark return is
E (Rp)=W1*E(A)+W2*E(B)+W3*E(C)
= 0.5*15%+ 0.3*7%+0.2*3%
= 10.20%
The allocation effect for portfolio of Manager A
is
(Portfolio weight – Bench mark weight) * Bench mark...