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Carrying on Through a Crisis, with Factors 

Factor Investing , Risk Management

Factors have long had a place in constructing equity portfolios, but investors increasingly use factors in sovereign and corporate bonds, commodities and currencies. Which non-equity factors have been the best performers coming out of recent crises, and why?

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Factors in Focus: Val-come Back! Shifting Factors as the Cycle Turns 

Factor Investing

In this two-year-anniversary edition of Factors in Focus, we reflect on the historical relationships between factor returns and macro cycles, which have provided useful information for investors looking to take an active stance on factor exposures based on their outlook.

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A Thematic Lens for Portfolios 

Global Investing

We show how MSCI Thematic Exposure relevance scores helped position growth funds, as an example, alongside thematic funds, and highlighted key megatrends that drove performance. A thematic lens can help analyze other categories and strategies as well.

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The Doctor Is Making House Calls: Capturing Exposure to Telehealth 

Factor Investing , ESG Research

Telehealth has the potential to reduce inequalities in access to care as well as relieve strain on health systems. We tested an approach that combines natural-language processing and MSCI ESG Ratings screens.

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Kuwait’s Move from Frontier to Emerging Market 

Global Investing

Kuwait’s reclassification from frontier to emerging market and inclusion in the MSCI Emerging Markets Index provides investors exposure to yet another Gulf Cooperation Council member, one that has worked to open its doors to foreign investors.

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Accounting for Revenue Sources Tells a Richer Story 

Global Investing , Emerging Markets , Economic Exposure

Despite North America’s outsized weighting in the MSCI ACWI Index, companies in the index generated only 30% of their global revenues there. We explore how examining revenue sources may help uncover opportunities of economic growth around the world.

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Private-Infrastructure Risk: Tilting at Windmills 

Risk Management

Private-infrastructure investments are often treated as comparable to relatively safe long-duration bonds with attractive yields, but this approach can mislead investors as they evaluate risk, yield and portfolio hedges.

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China Tech Investing: An Indexed Approach 

Global Investing

China’s emergence as a tech leader holds great potential. But its technology value chain isn’t limited to IT firms. Opportunity lies across sectors, from electric vehicles to medical devices. How does one effectively gain exposure?  

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How Diversified Are US Equity Investors? 

Global Investing

The universe of stocks represented by the MSCI USA Index comprises over 600 securities. U.S. investors might assume there are ample opportunities for diversification and potential risk reduction in the domestic market. Is this assumption correct?

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The CDS Market Stayed Healthy amid COVID 

Risk Management

Since the global financial crisis, many have expressed concern about the health and future of credit-default swaps. Could institutional investors find the liquidity they need to hedge credit risk in subsequent periods? We examine CDS liquidity during the COVID-19 crisis.

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Stress Testing Multiperiod Inflation Scenarios 

Fixed Income , Risk Management

Will inflation rear its ugly head in the U.S.? Although the outcome of the U.S. elections might have lowered inflation expectations, investors can prepare for scenarios where inflation goes up. In this stress test, we examine three scenarios for inflation over varying time horizons.

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Investor Reaction to US Elections and COVID-Vaccine Progress 

Factor Investing , Risk Management , ESG Research

To gauge investor expectations after Joe Biden was declared winner of the U.S. election and good news broke about COVID vaccines, we surveyed 151 U.S.-based financial advisers. We examine the advisers’ views on the next 12 months and markets’ reaction since Election Day.

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Did Size Matter for Small-Cap Outperformance? 

Factor Indexes , Factor Investing , Factors

Good vaccine news on Nov. 9 drove unusual equity-index and factor returns, including in small caps. The MSCI USA Small Cap Index returned 3.03% that day vs. 0.82% for the MSCI USA Index. Was this due to the size factor, or was there a bigger story?

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Are Momentum’s Wings Finally Starting to Melt? 

Factor Investing , Factors

Positive vaccine news on Nov. 9 caused big moves in industry and style factors. Those hit hardest this year jumped, while previous high performers slumped. Did this mark new factors leadership and a long-awaited rotation from momentum to value?

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Chinese Government Bonds: Higher Yield, Less Risk? 

Global Investing , Risk Management

Global investors’ interest in Chinese government bonds has risen, as these bonds offer higher yields than developed-market sovereign debt. For investors thinking about adding Chinese bonds to their portfolios, what could be the impact on portfolio risk?

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What ESG Ratings Tell Us About Corporate Bonds 

ESG Research , Risk Management

How did incorporating ESG factors affect the performance of corporate-bond portfolios? Did ESG add insights beyond credit ratings? How did ESG impact risk and performance of investment-grade and high-yield bonds? Short-dated versus long-dated bonds?

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Will Interest Rates Surge? Evidence from Options Markets 

Fixed Income , Risk Management

With long-term interest rates near record lows, conventional wisdom suggests that they can only go up. But the interest-rate option markets seem to be telling a different story — that rate decreases are also a distinct possibility.

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China A Shares: What Have We Learned? 

Emerging Markets , Global Investing

In this first of a series of blogs covering specific index-inclusion stories, we explore China A shares’ inclusion in the MSCI Emerging Markets Index by looking back at how it occurred and what’s happened since with market and investor reaction.

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Was Infrastructure Solid During COVID-19? 

Real Estate Investing , Risk Management

Infrastructure investments have not been spared the effects of the pandemic. A closer look across investment types, subsectors and risk levels over time may provide useful perspective as private-capital firms and their investors manage through.

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Aligning with the Paris Agreement: An Index Approach 

ESG Research , Global Investing

Institutional investors are under pressure to align their strategies with a maximum global temperature increase of 1.5^oC as targeted by the Paris Agreement. We examine how they can approach this while respecting other investment constraints.

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Is US Equity Overvalued? A Macro View 

Equity Themes , Risk Management

Headed into what some see as “the second wave” of COVID-19, U.S. equity investors may ask: Is this a sustainable market recovery, or a bubble that may burst? We examine the question with our model for market-implied U.S. equity risk premium.

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How Portfolio-Weighting Schemes Affected Factor Exposures 

Factor Investing , Factor Indexes , Factors , Risk Management

Single-factor portfolios seek high exposure to a target factor and limited exposure to non-target ones. We assess the impact that common portfolio weighting schemes have on these exposures, as well as on portfolio efficiency, concentration and investability.

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Using Factors As a Magnifying Glass for Equities 

Factor Indexes , Factor Investing , Factors

Factors have been shown to be important systematic sources of risk and return. We examine how factor analysis can help identify investment characteristics that lie beneath the surface of seemingly similar stocks and equity portfolios.

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Factors in Focus: Impact of Inflation on Style Factors 

Factor Investing , Global Investing , Risk Management

Global equities continued to rally in Q3, brushing aside fear of a second wave of COVID-19 and a large economic slump. We review what it meant from an equity and fixed-income factor perspective and look at what our models showed headed into Q4

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Hertz So Good? 

Fixed Income , Risk Management

We look at the unusual bankruptcy of Hertz Global Holdings Inc. — whose equity rallied in early June, when holders of Hertz bonds were expecting losses as high as 90% in default — to discuss the importance and subtleties of firms’ capital structures.

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Can MBS Duration Turn Negative? 

Fixed Income , Risk Management

As mortgage rates have hit record-breaking lows, prepayment speeds have doubled. With the combination of a high price premium and elevated prepayment speed, could duration of mortgage-backed securities stray into negative territory?

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Stress Testing Inflation Scenarios 

Fixed Income , Risk Management

Market-implied expectations indicate modest inflation. But some observers are concerned inflation may significantly rise, while others fear deflation. We discuss four inflation scenarios — and their potential implications for stocks and bonds.

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Bond Liquidity: How Bad Was COVID? 

Risk Management

Was bond liquidity worse during the COVID-19 outbreak or the 2008 global financial crisis? We analyzed transaction costs from the forced selling of USD 10 million of U.S. corporate bonds, throughout the two crises.

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Assessing Company Alignment with UN SDGs 

ESG Research , Global Investing

Five years ago, the United Nations adopted 17 UN Sustainable Development Goals (SDGs) in an effort to end extreme poverty, reduce inequity and protect the planet by 2030. Using a new tool, we examine whether companies are walking the walk.

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Missed Rents’ Impact on Real Estate 

Real Estate Investing , Fixed Income

Some commercial tenants have stopped paying rent amid COVID-19. Without rental income, property funds are not able to pay distributions to shareholders and borrowers cannot service their debt. We analyzed property-fund data to assess the impact on investors.

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How to Describe a Factor 

Factor Indexes , Factor Investing , Factors

How to define a factor? It’s a challenge for asset owners and wealth managers in evaluating how well factor products meet investment objectives. We found an improved and more robust measure can be formed by combining multiple descriptors. 

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Are Securitized Products Ready for the LIBOR-SOFR Transition? 

Fixed Income , Integrated Risk Management

Will the securitization industry be ready for the transition from LIBOR to the secured overnight financing rate (SOFR), as it faces the fact that LIBOR can no longer be guaranteed beyond the end of 2021? As the industry mobilizes, significant challenges remain.

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ESG in Mexico: At a Fork in the Road? 

ESG Research , Emerging Markets , Global Investing

Mexican companies’ ESG risk-mitigation practices have come a long way over the past decade, but there has been some slippage over the past two years. We examine the current status and why investors may want to pay attention.

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Alternative Views of Equity-Market Liquidity During COVID-19 

Emerging Markets , Global Investing , Risk Management

Institutional investors have typically used traded volume as a way to assess market liquidity. Adding alternative measures that gauge market impact and trading costs can provide a more comprehensive view for portfolio managers and traders.

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Hedging Inflation: A Scorecard 

Integrated Risk Management , Fixed Income , Global Investing , Risk Management

Aggressive actions by central banks and soaring government budget deficits have raised concerns among some investors that inflation may significantly rise. We examine whether an inflation hedge was worth the cost over the past 13 years.

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Understanding the Industry-Momentum Factor 

Factor Investing , Risk Management , Global Investing

When COVID-19 first swept through global equity markets, many factors exhibited unprecedented performance swings. How could institutional investors interpret the industry-momentum factor’s moves in the context of the underlying market dynamics?

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Growth Without the Side Effects 

Factor Indexes , Factor Investing , Factors

Growth has sometimes been viewed as the opposite of value. By extending the concept of growth at a reasonable price, we were able to capture the growth premium without it being lost to unintended factor exposures.

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The Risk of Risk Limits 

Risk Management

In times of heightened volatility, risk limits can protect against equity-market drawdowns. While such measures can dampen portfolio losses, they may also have an impact on long-term returns, particularly in case of a sharp V-shaped market recovery.

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Index Futures and the Expansion of Equity Markets in EM and Asia 

Global Investing , Emerging Markets

Given equity market growth in the emerging markets and Asia, and the dispersion of returns across individual subregions and countries, some have looked beyond traditional long-only approaches, to others, such as futures. We explore those options.

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Did Bonds Deliver? Leveraging Fixed Income During the COVID Crisis 

Fixed Income , Risk Management

Investors may employ leverage with lower-risk asset classes such as bonds to seek higher risk and returns. We assessed the effects of leverage on the returns of three hypothetical multi-asset-class portfolios during the COVID-19 crisis.

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Corporate Bonds Through a Factor and ESG Lens 

ESG Research , Factor Indexes , Factor Investing , Factors , Fixed Income , Risk Management

COVID-19 has had a profound impact on how companies manage cash flows and liquidity. Bond investors face the possibility of increased leverage, rating downgrades and defaults. Can factors and ESG metrics shed light on these risks?

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Managing Climate Risk in Equity Portfolios: A Case Study 

ESG Research , Global Investing

Institutional investors are increasingly focused on mitigating their climate-related risks. How could a “typical” active global equity manager have managed these exposures without disturbing the portfolio’s risk and return characteristics?

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Measuring Firms’ Remote-Workforce Abilities 

Factor Investing , Factors

It’s clear that some companies were better positioned to take advantage of a remote work environment than others. We built a hypothetical “remote-operation capacity” factor to seek to measure the effect on different firms.

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Up in Smoke? Brazil’s Wildfires May Affect Bond Spreads 

ESG Research , Fixed Income , Risk Management

Clearing Brazilian forests to make way for agriculture may spur a backlash to soy and beef producers if purchasers impose deforestation-free rules. What are the potential implications for debt of affected companies and for Brazilian sovereign debt?

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Would Integrating ESG in Chinese Equities Have Worked? 

ESG Research , Emerging Markets , Global Investing

ESG ratings have reflected financial risk and returns in developed-market and emerging-market equities. But was this true in China, where ESG considerations are still in their infancy?

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Factors in Focus: How Trendy Is Your Style Factor? 

Factor Investing , Risk Management

As markets rallied worldwide, investors took on high-beta exposure and rotated away from stocks with lower risk. The latest edition of Factors in Focus explores the details.

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Surging Corporate-Bond Supply: Reason to Worry? 

Fixed Income , Risk Management

In the months since the onset of the COVID-19 pandemic, companies issued a large amount of corporate bonds. As a result of this surge, corporate debt has grown substantially — a burden that institutional credit investors may wish to monitor closely.

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Did Value-Factor Exposure Deliver for Value Funds? 

Factor Investing , Global Investing

Building on previous MSCI research into the nuanced performance of the value factor, including the impact of sectors and other style factors, we look at how exposure to value drove the performance of actively managed value funds.

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ESG Ratings: How the Weighting Scheme Affected Performance 

Global Investing , ESG Research

Our recent research suggests that environmental and social issues were more industry specific and tended to show up in financial measures over a longer time frame compared to governance issues. How can E, S and G issues be combined?

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Short Interest Factor Performance in Times of Crisis 

Factors , Factor Investing

Given recent short interest factor performance, we asked: What has been the relationship between this factor and large market drawdowns? Were there changes in short selling during COVID-19? Did short-selling bans affect short interest factor performance?

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COVID-19 and Real Estate: The Devil Is in the Dispersion 

Real Estate Investing , Risk Management

Many real estate markets were showing signs of a slowdown even before COVID-19’s negative impact on property portfolios. Has this correction been similar to previous ones? We looked at dispersion of returns, within and across real estate sectors, for the answer.

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Which ESG Issues Mattered Most? Defining Event and Erosion Risks 

Global Investing , ESG Research

Very different ESG issues can be material for different industries. Our research suggests that risks can be divided into two main types: “event” risks and “erosion” risks to companies’ long-term competitiveness. Which ones mattered most for E, S and G?

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Is ESG All About the ‘G’? That Depends on Your Time Horizon. 

Global Investing , ESG Research

The conventional wisdom has it that governance is the most dominant of the three E, S and G pillars. But our analysis finds different results when looking at contribution to performance over different time horizons.

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Consumer ABS: Recovering from Coronavirus? 

Risk Management , Fixed Income

After the U.S. COVID-19 lockdown, new monthly remittance reports for asset-backed securities indicated performance deterioration and signaled potential challenges ahead. Meanwhile, in China, ABS showed signs of recovery.

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Equity-Market Dislocation and Index-Based Investing 

Emerging Markets , Global Investing

Market turbulence amid COVID-19 presented risks and opportunities. We explore how indexes , combined with the use of fundamental data, provided a wealth of information to help identify potential market dislocations.

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Outcome-Oriented Factor Investing with a ‘Barbell’ Approach 

Factor Indexes , Factor Investing , Global Investing

Though relatively new to wealth investors, index-based factor investing has some similarity to a high-conviction, outcome-oriented approach. We explore combining the two when seeking outcomes such as equity growth, yield enhancement and risk mitigation.

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Can AI Model the Complexities of MBS Prepayment? 

Fixed Income , Risk Management

Machine learning using neural networks has been successfully applied to fields in which extremely complex patterns can prove challenging for other algorithms. Are neural networks suited for modeling prepayment risk in agency mortgage-backed securities?

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Building Better ESG Indexes: 30 Years On 

Global Investing , ESG Research

How ESG indexes have evolved over the past 30 years: A Q&A with Stuart Doole, head of new index development at MSCI, about his conversations with investors since the COVID19 crisis started, the growth of ESG investing and how MSCI Research uses AI and machine learning in developing its ESG indexes.

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Robust Selection Paid Dividends 

Global Investing

Dividend cuts following the COVID-19 slowdown led to approximately USD 194 billion of lost dividends between February and April 2020. An approach that looked beyond dividend-yield ranking would have avoided some affected companies, based on our analysis.

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Four COVID-19 Scenarios: What Might Happen Next? 

Fixed Income , Risk Management

Our latest COVID-19 stress test looks at four potential financial-market outcomes ranging from a swift V-shaped recovery to a pessimistic L-shaped scenario, in which outbreaks recur and lockdowns return well into 2021.

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Five lessons for investors from the COVID-19 crisis 

ESG Research , Factors , Global Investing

COVID-19 unleashed a torrent of sharp movements across global financial markets. We highlight five key lessons for investors regarding global investing, managing factors, active management, indexed investing and ESG investing.

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Using Risk Analytics to Highlight Opportunities in Volatile Markets 

Risk Management , Fixed Income

Risk analytics can serve many functions for an institutional investor, including compliance, risk management, portfolio management and trading and strategy development. They may also highlight new opportunities that may be unique to volatile markets.

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Index Rebalancing During High Volatility: A Balancing Act 

Global Investing , Emerging Markets

Significant volatility during COVID-19 highlights a need for index reconstitution, but some may worry about trading costs and excess turnover. We investigate the balance between appropriate market representation and avoiding high index turnover.

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Consumer ABS Under Coronavirus in the US and China 

Emerging Markets , Fixed Income , Global Investing , Risk Management

Beyond COVID-19’s steep human toll, the pandemic’s disruption of economic life has led to widespread loss of income and impaired some borrowers’ ability to repay loans. What could the impact be for investors in consumer asset-backed securities in the U.S. and China?

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How Hedge Funds Navigated the Start of COVID-19 Volatility 

Factor Investing , Factors , Risk Management

How did hedge funds navigate the initial volatility amid COVID-19? Though holdings information is limited, and delayed, we gained insights into their reaction by examining the change in hedge-fund portfolios between the end of January and end of February.

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Credit in the COVID Crisis: Contagion, Valuation, Default 

Fixed Income , Risk Management

As the COVID-19 crisis unfolded, credit markets deteriorated under the stress of a sharply diminished economic outlook. We analyze three indicators of credit-market conditions: default risk, relative value and contagion risk.

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Was the Treasury Price Right? Yield Dispersion Amid COVID-19 

Fixed Income , Risk Management

Despite appearances, Treasury yield curves are statistically estimated using price data from hundreds of Treasurys. We compared recent yield dispersion — or the degree to which individual bond yields fall away from the curve — to historical levels.

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Using Derivatives to Manage Volatile Markets 

Emerging Markets , Global Investing , Risk Management

We’ve previously noted growth in derivatives contracts to manage emerging-markets exposure in normal and stressed times. Now, facing a real-world stress test, how did investors use these tools? How have implied volatilities and option premium changed?

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Hunting a COVID-19 factor 

Factor Indexes , Factor Investing , Factors

Can we identify a COVID-19 factor and quantify companies’ exposure to it? We explored three ways to do so — from very simple to more complex methods.

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Did hedging tail risk pay off? 

Risk Management

Investors taking stock of the coronavirus fallout and recent market volatility have begun exploring tail-risk-hedging strategies as a way to protect against further drawdowns. What are the potential costs and benefits of hedging against tail risk?

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MSCI ESG Indexes during the coronavirus crisis 

ESG Research , Emerging Markets , Global Investing

The COVID-19 outbreak is the first real-world test since the 2008 global financial crisis of the resilience of companies with high MSCI ESG Ratings. We analyze the performance of four standard MSCI ESG Indexes over Q1 2020 and longer periods.

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US inflation: The market’s implied view 

Fixed Income , Risk Management

Dramatic declines in oil prices, the Federal Reserve’s aggressive monetary policy and higher fiscal deficits may create a confusing outlook for U.S. inflation. We examine what the market is telling us about where inflation may be heading.

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Resilient stocks during the dog days of March 

Factor Investing , Factor Indexes , Factors

While many stocks were in the red in mid-March, as COVID-19 and oil-market shocks took hold, some were “redder” than others. We examine global markets to better understand the characteristics of the more resilient stocks during this period.

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Can diversification help weather the coronavirus storm? 

Emerging Markets , Factor Indexes , Factor Investing , Factors , Global Investing

Whether investors include a tactical approach or invest strategically for the long term, diversifying across factors, sectors and geographies has historically played an important role in portfolio construction. 

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Could coronavirus depress US housing prices? 

Risk Management , Fixed Income

The large economic shocks unleashed by the coronavirus pandemic could be comparable to or even exceed those of the 2008 global financial crisis (GFC). We used our models to assess whether these shocks could hurt U.S. housing prices as much as the GFC did.

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Green bonds: Growing bigger and broader 

ESG Research , Fixed Income , Global Investing

As the green-bond market matures, it is developing offshoots. The types of projects financed, as well as the emergence of innovative types of bonds and loans linked to the ESG targets, is growing. These initiatives may broaden the market for green investment options.

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Corporate-bond performance by factors and ESG 

ESG Research , Factor Indexes , Fixed Income , Risk Management

The volatility seen in equity markets was also present among investment-grade corporate bonds,. We use factors and ESG ratings to dissect these bonds’ performance over Q1 2020.

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For target-date funds, hindsight was 40/60 

ESG Research , Factor Indexes , Fixed Income , Risk Management

Recent market volatility has been especially unkind to those closest to and early in retirement, as the sequence of returns matters for retirement income. Would low-volatility and ESG investments have benefited target date funds during volatile periods?

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Bond ETFs and underlying price uncertainty 

Risk Management , Fixed Income

In the recent market meltdown, some fixed-income ETFs traded at discounts as high as 6% to net asset values, a level not seen since 2008. Could ETF prices deviate from the value of the underlying portfolio during market stress and leave investors exposed to losses on top of the falling bond prices?

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Quantifying ESG fund performance 

ESG Research , Factors

One challenge facing investors is how to quantify the impact ESG has had on their investment process. We analyzed top ESG funds to better understand the contribution of the ESG factor to their performance.

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Will coronavirus reduce emissions long term? 

ESG Research , Global Investing

Has COVID-19 affected carbon emissions? Using satellite imagery from NASA and the European Space Agency, we examined the empirical data so far to understand the potential impact, and if there may be a decline in global greenhouse-gas emissions in 2020.

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Factors in Focus: Risk sentiment and factor dynamics in a crisis 

Factor Indexes , Factor Investing , Factors , Fixed Income

We analyzed the market effects from COVID-19 and a Saudi Arabia/Russia oil-price war. We also examined – for the first time – credit factor performance. How did the quarter play out? What did our adaptive multi-factor model show as it ended?

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Could coronavirus lead to default contagion in CLOs? 

Risk Management , Fixed Income

The market for collateralized loan obligations is under severe stress during the COVID-19 pandemic. We used MSCI’s loan and CLO models to assess a sample CLO’s loan-default risk characteristics. Could a wave of defaults harm CLOs?

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The end of an era for the bond-equity relationship? 

Risk Management , Fixed Income

Stock and bond prices dropped together during the recent coronavirus sell-off, leading to fears that U.S. Treasurys were no longer the safe haven they had been in previous crises. Did it mark the end of an era of flight to quality?

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Managing risk-model uncertainty through a crisis 

Risk Management

The impact on risk policy has been similar across market crises, as investors consider how to use their models in the new regime. We describe adaptive modeling for internal and external risk policy, and long-view backtesting to support decision-making.

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‘Nowcasting’ private equity in the coronavirus crisis 

Risk Management

What may be happening to the value of portfolios of private assets during the COVID-19 crisis? We used MSCI’s private-equity model, which integrates data on private assets from our partner Burgiss, to try to shed some light.

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How could coronavirus impact credit markets? 

Risk Management , Fixed Income

While newspaper headlines are focused on volatile stock markets stemming from the COVID-19 pandemic, credit markets are not immune. Our latest stress test asks, “What would it mean for portfolios if losses reached 2008 levels?”

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Asset allocation and index futures during market crises 

Emerging Markets , Global Investing , Risk Management

During market crises, institutional investors have employed derivatives contracts to hedge market risks or express views on certain performance/risk characteristics. We explore prior use of futures for exposure management and tactical asset allocation.

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Updating the MSCI Agency MBS model for the COVID-19 crisis 

Fixed Income , Risk Management

The COVID-19 pandemic has severely strained U.S. housing finance, distorting near-term prepayment speeds for mortgage-backed securities. With MBS in uncharted territory, we updated the MSCI Agency MBS Model to help investors during the crisis.

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How coronavirus could hurt Chinese consumer ABS 

Risk Management , Global Investing , Fixed Income , Emerging Markets

The slowing Chinese economy and trade uncertainty had already put strains on the performance of Chinese consumer asset-backed securities. The COVID-19 pandemic could further harm the performance of these securities. Investors may wish to gauge the risks.

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Integrating ESG in emerging markets and Asia 

ESG Research , Emerging Markets , Global Investing

Previously, we have examined the relationship between ESG characteristics and financial performance in developed markets. In this blog post, we explore whether ESG characteristics  have had financially significant effects in emerging markets and Asia.

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What scenarios has the US equity market priced in? 

Risk Management

With the outbreak of the COVID-19 pandemic, the U.S. equity market turned sharply downward. We performed a reverse stress test considering various scenarios that potentially explain current valuations.

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Coronavirus and oil hit equities — how low can we go? 

Risk Management , Global Investing

We compare the market turmoil sparked by the coronavirus pandemic with levels of volatility, drawdown and recovery after 9/11 and the global financial crisis (the two other similarly severe economic and market shocks of the last 20 years).

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Have corporate green bonds offered lower yields? 

ESG Research , Risk Management , Fixed Income

Green bonds tended to offer lower yields than comparable non-green corporate bonds. What could explain green bonds’ lower yields? And is there any relationship between green-bond issuers’ environmental scores and bond yields?

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Coronavirus and a potential MBS convexity whipsaw 

Risk Management

Amid rising fears that the human toll of coronavirus will have a significant impact on the global economy, investors have sought safety in Treasurys and driven yields to all-time lows. This rate rally has posed a hedging challenge for investors in mortgage-backed securities.

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The coronavirus market impact spreads globally 

Factor Investing , Global Investing

Fear of a coronavirus pandemic and ensuing economic impacts caused sharp drops in global markets after an initially mild response. We look at recent performance from a factor perspective and how quickly factor returns and volatility reverted in past crises.

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A coronavirus stress test for global markets 

Fixed Income , Global Investing , Risk Management

After the coronavirus spread to multiple continents, markets recorded the worst week since the crisis. How much further could markets drop if epidemic turns into pandemic? Our stress test indicates room for further losses.

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Navigating market volatility with agency MBS models 

Fixed Income , Risk Management

We performed our annual review of MSCI’s model for managing prepayment and interest-rate risk in agency mortgage-backed securities. How closely did the model’s forecasts anticipate what we observed in the market?

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ESG and the cost of capital 

ESG Research , Global Investing , Emerging Markets

We know a lot about the relationship between companies’ ESG characteristics and financial performance. But was there a correlation between ESG scores and cost of capital?

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The coronavirus epidemic: Implications for markets 

Economic Exposure , Emerging Markets , Factor Investing , Fixed Income , Global Investing , Risk Management

The toll from the coronavirus has been felt throughout societies, leading to repercussions on the global economy and financial markets. We examine investor impact through markets’ economic exposures to China and factors and by stress testing portfolios.