Calculating Asset Class Contributions to Compound Returns

Summary

The document asks how to reproduce a chart showing each percentile group's contribution to an asset class's compound returns. The proposed approach is to calculate log returns for bottom, middle, and top groups, sum each group's returns, then divide those totals by the sum of the full return series. The question is whether this calculation produces the intended chart or whether another method is needed.

The accepted answer points to a spreadsheet that replicates the chart using U.S. equity data, with screenshots offered as evidence. However, the document does not include the spreadsheet, screenshots, or a written explanation of the calculation. It therefore provides a lead for further investigation rather than a self-contained method. The proposed ratio of summed log returns should not be treated as validated based on this excerpt alone.

Key ideas

• The question concerns attributing an asset class's compound returns to percentile groups.
• The proposed calculation sums each group's log returns and divides by the full series' summed returns.
• An accepted answer reports a spreadsheet replication using U.S. equities.
• The excerpt does not explain the spreadsheet method or establish that the proposed ratio is correct.

Tags

# Contribution to compound returns


# Contribution to compound returns












When trying to recreate this chart from Deutsche on contribution to compound returns of an asset class I'm using log returns of each percentile group (bottom, mid, top), take the sum and divide each of them by the sum of the full return series.

I don't know how to get from there to this chart or if that's even the right way to do it. Any ideas? Thank you

## Answer by phdstudent (score 2, accepted)

https://quant.stackexchange.com/a/76160

Difficult to explain in words. I have made an excel spreadsheet that replicates what you want (using US stock market equities). See two screenshots below:

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

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