Analyzing Equity and Bond Portfolios by Holdings and Returns

Summary

The report outlines portfolio attribution methods for stocks and bonds, using both holdings and return series. For equity holdings, it applies a multifactor framework to separate common-factor returns from idiosyncratic returns, then estimates portfolio style exposures and each style’s contributions to return and risk. For equity portfolios analyzed from net asset value returns, it proposes time-series regression against ten style-factor return series, including market capitalization, beta, momentum, volatility, liquidity, profitability, growth, and leverage.

For bonds, the holdings-based approach uses the Campisi model to attribute returns to coupon, Treasury, spread, and selection effects. A return-series regression instead attributes performance to alpha and rate, credit, default, convertibility, and currency components. The report also describes a tool for working with local or online holdings and net value data and extracting factor returns. It cautions that analysis based only on historical returns has limitations and argues for incorporating actual holdings. The provided text summarizes the methods and tool capabilities but contains no empirical results or validation details.

Key ideas

• Equity holdings can be decomposed into common-factor and idiosyncratic returns.
• Holdings-based equity analysis can estimate style exposures and their return and risk contributions.
• Equity return series can be regressed on style-factor returns to estimate exposures.
• The Campisi model attributes bond returns to coupon, Treasury, spread, and selection effects.
• Bond return-series analysis can attribute performance to several rate, credit, and currency components.
• Historical returns alone have limitations, so portfolio analysis should incorporate holdings where possible.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.