Many software suppliers and custodians claim to own Karnosky-Singer multi-currency attribution model, but do they really? The name has become synonymous with a powerful approach to determining the efforts from currency movements on a portfolio’s excess return and comes from the monograph Denis Karnosky and Brian Singer composed for the CFA Institute. Though a relatively short piece (as monographs are designed to be), a great deal is included in it of surface.
Carl Bacon did an excellent job of describing the model in his books, which arguably is highly recommended a friend piece to the model, and present on all performance dimension experts’ bookshelves. However, when we speak of the K-S model, what do we indicate? I discussed this recently with my co-workers John Simpson and Jed Schneider and then confirmed our conclusions with Brian. Second, that interest rates are broken away from the market side of attribution and included with the currency side, because, as Brian and Denis explain, rates of interest have a direct bearing on currency movement. We have observed some firms who claim to offer the K-S model, but who “lump” or combine the effects into a single value; i.e., the currency effect is shown as you, not two numbers.
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