Performance Perspectives Blog

Getting our attribution correct

by | Jan 2, 2014

In our classes I often comment how much of what we do in investment performance and risk is borrowed from other disciplines. For example, “attribution” is employed by many, to identify the source(s), cause(s) and/or contributor(s) of something.

In today’s WSJ, Jason Zweig offered a brief commentary on “The Year Ahead” (page A8), where he quoted G.K. Chesterton: “Wisdom should reckon on the unforeseen.” This pithy verse is one that could perhaps invoke multiple interpretations, and so I decided to “Google” it, to learn what others thought. This took me to an interesting page, where this very subject was taken up.

One contributor began with the following: “By way of explanation, the sentence makes sense when you know what Poes [sic] Paradox (and Poes [sic] Law) means.” This is because Chesterton’s line has been extracted from the following text: “As it has been well expressed in the paradox of Poe, wisdom should reckon on the unforeseen.” [emphasis added] The contributor continues with an explanation of Poe’s Law, which “was originally formulated by Nathan Poe in August 2005.”

This struck me as a tad suspicious, because I thought that Chesterton had departed this earth long before 2005. However, several folks applauded this contributor’s detailed and seemingly quite logical interpretation of the Chesterton verse. That is until we get to someone who posited that “Another take on this quote could be that it was made in reference to the author, Edgar Allan Poe. The quote comes from ‘The Innocence of Father Brown,’ by G.K. Chesterton (1874 – 1936).”

And so, if Chesterton died in 1936, how could he have been referring to Poe’s Law, introduced by Nathan Poe in 2005? The attribution of the first contributor seems to be off the mark a bit.

Attribution is something that one must be cautious about, yes? A fundamental principle of investment performance attribution is to use the correct model (one that aligns with the investment approach); to do otherwise could lead to nonsensical results, as we discover above. Another fundamental component of the analysis should be, “does it make sense?” Something worth taking into consideration before reporting on one’s findings.

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