Patent ID: 7249082

Claim:
An arithmetic performance attribution method for determining portfolio performance, relative to a benchmark, over multiple time periods t, where t varies from 1 to T, comprising the steps of: (a) determining coefficients c 1 =A, and c 2 = [ R - R _ - A ⁢ ∑ j ⁢ ⁢ t ⁢ a j ⁢ ⁢ t ∑ j ⁢ ⁢ t ⁢ a j ⁢ ⁢ t 2 ] , where A has any predetermined value, a jt is a component of active return, the summation over index j is a summation over all components a jt for period t, R = [ ∏ t = 1 T ⁢ ⁢ ( 1 + R t ) ] - 1 , ⁢ R _ = [ ∏ t = 1 T ⁢ ( 1 + R _ t ) ] - 1 , is a portfolio return for period t, R t is a benchmark return for period t, and the components a jt for each period t satisfy ∑ j ⁢ a j ⁢ ⁢ t = R t - R _ t ; and (b) determining the portfolio performance as R - R _ = ∑ it ⁢ ⌊ c 1 ⁢ a it + c 2 ⁢ a it 2 ⌋ , where the summation over index i is a summation over all the terms (c 1 a it +c 2 a it 2 ) for period t.