Brinson Return Attribution for Portfolio Timing and Security Selection

Summary

The tutorial explains how Brinson performance attribution separates a portfolio’s actual return from its benchmark return and decomposes active performance into timing, security selection, and an interaction component. The benchmark reflects planned asset weights and passive returns; the timing and selection comparisons help identify how allocation changes and within-category choices contributed to results. The framework is presented as a way to connect investment decisions with portfolio outcomes.

A worked example applies the analysis to a dual moving average strategy on a limited set of Chinese equities over 2015–2017. The strategy buys when a short average is above a longer average and exits when it is not, then uses BigQuant’s backtest output to generate return paths and contribution plots. The tutorial reports positive timing contribution, negative selection contribution, and positive excess return in this example. These findings are specific to the chosen stock list and period; the article does not provide enough detail to establish robustness or generalize performance.

Key ideas

• Brinson attribution compares actual portfolio returns with a benchmark built from planned asset weights and passive returns.
• The framework separates active performance into timing, security selection, and an interaction component.
• The example uses a dual moving average strategy on a selected set of Chinese equities.
• The reported example attributes positive contribution to timing and negative contribution to security selection.
• Attribution results describe the tested portfolio and period and do not establish that the strategy will generalize.

Tags

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