How do I identify the OPTIMAL sector decision in a Brinson attribution table?

Short answer: "optimal" almost always means BOTH the allocation effect AND the selection effect are positive in the same row. The manager got both decisions right — overweighted (or correctly underweighted) the right sector AND picked the right stocks within it. The highest single positive number does NOT win unless the OTHER column is also positive.

The scan pattern

Given any Brinson attribution table:

Walk through a typical table

The correct answer is Basic Materials because it is the ONLY row where both columns are positive. The manager (a) overweighted the right sector (relative to benchmark) AND (b) picked stocks within Basic Materials that beat the Basic Materials benchmark. Both calls right.

Why students fall for Technology

The temptation: Tech has the largest positive selection (+0.44%). It is the biggest positive number in the entire table. Tech also feels like a "winning" sector — high absolute return. So it seems like the natural answer.

The trap: the question is NOT "which sector had the best stock picking" — that would be Tech, with selection +0.44%. The question is "which sector had the OPTIMAL DECISION," which is two-decisions-right, not best-of-one-column.

The four cases to memorize

When the test asks for "optimal" pick the ++ row. When the test asks for "worst" pick the −− row. The mixed rows (+− and −+) are NEVER the answer to either of those question types.

One more nuance — if multiple rows are ++

Occasionally an exam will give you a table with TWO sectors where both allocation and selection are positive. In that case the answer is usually the sector with the LARGER TOTAL contribution (allocation + selection + interaction). But always check for the ++ first — that screens out 80% of the rows.

For more attribution practice see our Brinson attribution article.