portfolios as well. CountPy ContPibUtions to Return For a given country, compute the exposures of each position to that country. For example, a position may have an exposure of one if it is exposed to a country, zero otherwise. Let q (t) be the Kth security's exposure to the cth country. The one-period contributions from the cth country are defined as follows. The cth country's contribution to the managed portfolio's total return is N Its contribution to the portfolio's local return is N ^nJt)wt(t-l)K(t) "=1 In addition to contributions, we compute returns: II The cth country's total return as computed from the managed portfolio's holdings is N N ill The cth country's local return as computed from the managed portfolio's holdings is N N ^nJt)wt(t-l)K(t)^^Jt)wPn(t-l) n=l n=l In addition to the preceding computations, within each country we identify and measure four sources of return. These sources sum (over all countries) to the portfolio's total active return. 1. Country currency weight. This is a measure of how well a portfolio's currency exposure has been managed relative to the currency exposure in a benchmark portfolio. Country currency weight is approximately equal to the difference be tween the exchange rate return of the managed portfolio and the exchange rate return of the benchmark portfolio. The country currency weight consists of two parts: fl) relative currency weight and (2) currency performance effect. Relative currency weight measures the impact that currency exposure has on the active portfolio's total return that results from differences between managed country weights and benchmark country weights. Currency performance effect measures the impact that currency exposure has on the active portfolio's total return that results from the performance of different currencies. 2. Country allocation (market weight). This measures the impact on the active portfolio return from selecting different countries in proportions that are dif ferent from the benchmark.