Should the Interaction Effect be Allocated? A “Black Box” Approach to Interaction
$25
Interaction should be calculated and assigned to either/both the allocation effect or the selection effect. The focus of this article is how the interaction effect should be allocated. While some allocate it completely to either selection (most common) or allocation, and others allocate it equally, the author suggest a set of logical rules for allocating the interaction effect. They provide adequate discipline in allocating, making the adjustments to the allocation and/or selection effects more relevant and representative of the investment results.
Author: David Spaulding
Interaction should be calculated and assigned to either/both the allocation effect or the selection effect. The focus of this article is how the interaction effect should be allocated. While some allocate it completely to either selection (most common) or allocation, and others allocate it equally, the author suggest a set of logical rules for allocating the interaction effect. They provide adequate discipline in allocating, making the adjustments to the allocation and/or selection effects more relevant and representative of the investment results.
