The ETF constituents and attribution function provides an overview of the ETF composition and quantifies how components have contributed to the overall performance of an ETF. The function breaks down an ETF by individual stocks, sectors and sub-sectors. Each component has a weight, performance and attribution.
Attribution analysis is a way to decompose the return of an ETF to explain how stocks and sectors have impacted the return of the overall ETF. The calculation for attribution is the performance multiplied by the weight. Attribution is additive, which means that summing up the attribution for individual components (stocks or sectors) is equal to the total performance of the ETF.
In the screen shot below, the HDS function shows that the S&P 500 ETF (SPY) is up 4.8% YTD. Information Technology sector accounts for 338 bps (or 3.38%) of the 4.8% SPY YTD return. And Amazon (AMZN) accounts for 92bps or 1/5 (0.92/4.8) of the SPY YTD return.
Calculation details and caveats
For a stock, we calculate the attribution by multiplying the estimated weight at the beginning of the period with the performance during the period. The reason we have to estimate the weight is that we don't have constituents going back in history. We only have the current constituents.
In a perfect world, the sum of the attributions for stocks and sectors should match the performance of the ETF. However because we only calculate the attribution of US-listed stocks and we only have current constituents, the attribution will not sum up exactly to the actual performance.