Sir, why returns based attribution is most vulnerable to data manipulation?
And what is the difference between returns based attribution and returns based style analysis? Is the broad purpose the same?
Text from core-
Returns-based attribution is the easiest method to implement, but because it does not use the underlying holdings, it is the least accurate of the three approaches and the most vulnerable to data manipulation.
Returns-based style analysis (RBSA) uses a regression of fund returns against major risk factors toidentify the risk exposures of the fund. In contrast, holdings-based style analysis (HSBA) looks atthe current individual holdings of the fund and assess the style of the fund from these individualholdings. As such, the HBSA requires a higher level of data than RBSA; hence, the firstconsideration of lower data requirements implies RBSA would be more appropriate. The secondconsideration of mitigating the effects of window dressing also implies RBSA is more appropriate.Window dressing occurs when a manager changes their holdings shortly before a reporting datein order to change the perceived risk exposures of the fund. RBSA would be less affected bywindow dressing because the historical regressions look at average portfolio exposures over theregression period rather than being a current snapshot
my question is about Returns based attribution from Perf Evaluation reading..Yes style analysis I understood…