Extended-lister
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Could Investment Grade Be as Risky as High Yield?
Apr 16, 2021 András Bohák , Andras RokobFixed Income , Risk Management
Learn MoreDo high-yield and investment-grade bonds carry the same level of risk? For investors using common measures like value-at-risk models, IG- and HY-bond portfolios’ risk levels appear to have converged. But traditional models may miss important aspects of HY risk.
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Innovation Remix: Adding Thematics to Equity Programs
Apr 14, 2021 Anil Rao , Raman Aylur SubramanianEquity Themes , Factor Indexes , Global Investing
Learn MoreHow can investors incorporate transformative, but volatile thematic investments while seeking to control for valuation and total and active risk? We examine three approaches that improved a portfolio’s “innovation profile” with modest changes to risk.
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Long-Horizon Risk: The Past 50 Years
Apr 13, 2021 Monika Szikszai , Thomas VerbrakenFixed Income , Risk Management
Learn MoreFor long-horizon investors that aim to ride out volatility, short-term risk measures may be insufficient. We used multiperiod stress testing to evaluate one- and five-year returns of hypothetical multi-asset-class portfolios using 50 years of history.
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Including Microcaps in Benchmark Indexes: Japan vs. US
Apr 7, 2021 Naoya NishimuraEquity Themes , Global Investing , Factor Investing
Learn MoreSelecting an equity benchmark may mean balancing market coverage and investability. For example, exhaustive coverage may include microcap stocks, with lower liquidity and investment capacity. But excluding them may reduce low-size-premium exposure.
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Factors in Focus: Value Springs into Action
Apr 6, 2021 Hitendra D Varsani , Waman VirgaonkarFactor Indexes , Fixed Income , Factor Investing
Learn MoreValue has historically outperformed in economic recoveries. With the reopening of the global economy we examined value’s performance against other factors, and exposures from our adaptive multi-factor model at the end of Q1.
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Reopening Economies and the Resurgence in Value
Mar 31, 2021 Waman Virgaonkar , Hitendra D VarsaniFactor Indexes , Global Investing , Factor Investing
Learn MoreAfter 15 years of challenging performance, many have asked if value is still a valid investment strategy. But the reopening of the global economy following vaccination rollouts has reignited interest across stocks, sectors, countries and regions.
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Value-Performance Anxiety
Mar 23, 2021 Mehdi Alighanbari , Saurabh KatiyarGlobal Investing , Factor Investing
Learn MoreDespite a recent performance lift, many still ask whether the value factor is broken. We analyze the reasons behind its underperformance and start exploring the potential of updates to value definitions and approaches to value-portfolio construction.
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Considerations for Dedicated China Equity Allocations
Mar 18, 2021 Zhen WeiEmerging Markets , Global Investing
Learn MoreChina provides global equity investors a unique set of opportunities and challenges as they evaluate a potential dedicated investment program and how to approach asset allocation from policy configuration to portfolio implementation.
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Managing the Risks of LIBOR Replacement
Mar 17, 2021 Greg Scheuer , Maks OksFixed Income , Risk Management , Global Investing
Learn MoreInvestors now have clarity on the process of transitioning away from LIBOR and falling back on replacement benchmark rates. We used stress tests to show that fallback modeling may be necessary to measure and manage the risks of LIBOR instruments.
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The Pace of Fast Change: Growth vs. Thematic Investing
Mar 16, 2021 Anil Rao , Stuart DooleFactor Indexes , Factors , Global Investing , Factor Investing
Learn MoreInvestors considering thematic investments to gain exposure to firms whose fortunes may not be captured by fundamental growth measures, may ask: What are the key opportunities – and challenges – that distinguish thematic from growth investing?
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Hedge funds held heavy, relatively illiquid short positions in crowded stocks before the January 2021 short squeeze. We created a risk factor that added explanatory power and may provide insights into potential short squeezes and other risks.
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Are Growth and Value Indexes Still in Style?
Mar 9, 2021 Guillermo Cano , Abhishek GuptaFactor Investing , Risk Management , Global Investing
Learn MoreGrowth and value indexes were created in the 1980s as finer tools than market-cap indexes to measure the performance of growth and value funds. Are style-specific indexes still a relevant choice to use as benchmarks for these funds?
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How Inflation Could Affect Multi-Asset-Class Portfolios
Mar 3, 2021 Thomas Verbraken , Daniel SzaboReal Estate Investing , Fixed Income , Global Investing , Integrated Risk Management
Learn MoreMarket participants are hotly debating whether U.S. monetary and fiscal policy may cause inflation. We consider four scenarios — reflation, disinflation, an overheated economy and stagflation — and their potential impact on multi-asset-class portfolios.
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How Have Stocks Responded to Changes in Climate Policy?
Mar 1, 2021 Guido Giese , Zoltán Nagy , Bruno RauisESG Research , Global Investing
Learn MoreTo what extent has climate risk been priced into equity markets? Is there a “brown” discount and a “green” premium? Has this shifted over time? How can we model such risks as the world moves toward net-zero targets? We examine the financial impact of climate transition risk on global equity markets.
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Factoring in ESG
Feb 26, 2021 Guillermo Cano , Simon MinovitskyESG Research , Factor Investing , Factors
Learn MoreHow much does ESG contribute to portfolio risk and return? We looked at whether ESG performance was influenced by other factors or helped explain returns as a factor in its own right, using the MSCI Global Equity Factor Model + ESG.
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Finding the Sentiment Hidden in Regulatory Filings
Feb 24, 2021 Vipul Jain , Kunal Jha Learn MoreUsing natural language processing techniques, we constructed a sentiment factor that quantifies changes in the tone and content of company filings, and may be an indicator of future risks facing a company.
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Climate Transition and Bonds: Risk or Opportunity?
Feb 23, 2021 Bruno Rauis , Juan Sampieri , Andy SparksESG Research , Fixed Income , Risk Management
Learn MoreThe transition to a low-carbon economy could significantly redirect the flow of investments toward greener companies and technologies that limit carbon emissions. We consider the potential risk — and opportunity — for bond investors.
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Currency-Risk Hedging in Real Estate Benchmarks
Feb 22, 2021 Bert Teuben , Lionel Ebener , Chirag GosarReal Estate Investing , Risk Management , Global Investing
Learn MoreGlobal real estate investors can expose themselves to currency risk. Using a hedged index, they may better align their benchmark and investment approach and ensure currency risk is accurately treated in allocation modeling and performance attribution.
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A New COVID-19 Regime for MBS?
Feb 17, 2021 Yihai Yu , Miklós VörösFixed Income , Integrated Risk Management
Learn MoreIn 2020, the Federal Reserve’s purchases of mortgage-backed securities, low interest rates, mortgage-underwriting policy changes and technology advancements led to a historic refinance frenzy and posed an unprecedented challenge for MBS risk management.
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How does one identify or quantify a bubble? We propose a framework for assessing the “bubbliness” of stocks and portfolios, rooted in the idea that bubbles are driven by the same forces, and share characteristics with crowded trades.
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Cross-Currency Credit Spreads: Mind the Gap
Feb 8, 2021 Michael Hayes , Zach TokuraFixed Income , Risk Management
Learn MoreAn issuer’s credit spread should be consistent when measured in the USD- or EUR-denominated markets, because both are measuring the same credit risk. Yet divergence can occur as a result of liquidity or supply-demand imbalances, such as those in the COVID crisis.
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How Are High-ESG-Rated Bond Portfolios Distinct?
Feb 5, 2021 Hitendra D Varsani , Rohit Mendiratta , Guido GieseFixed Income , Risk Management , ESG Research
Learn MoreESG investing makes up an increasingly large footprint in equity portfolios, but ESG integration in bond portfolios is still in its early days. We examine the characteristics that make high-ESG-rated corporate-bond portfolios distinct.
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COVID Stimulus Helped Resilience of US ABS
Jan 29, 2021 Yini Yang , Joy ZhangRisk Management , Fixed Income
Learn MoreIssuance of U.S. asset-backed securities fell by a quarter in 2020 from the previous year, as credit tightened during the COVID-19 crisis. The performance of loans underpinning ABS proved resilient, however, as economic relief helped support consumers.
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Stress Testing Climate-Change Scenarios
Jan 28, 2021 David Lunsford , Thomas VerbrakenGlobal Investing , ESG Research
Learn MoreRegulators around the world are upping the ante on climate-related financial disclosures. How can investors stress test potential exposures to these changes in policy? We take a look within Europe.
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Carrying on Through a Crisis, with Factors
Jan 13, 2021 Andrew DeMond , Manuel RuedaFactor Investing , Risk Management , Fixed Income
Learn MoreFactors 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
Jan 6, 2021 Hitendra D Varsani , Waman Virgaonkar Learn MoreIn 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
Dec 17, 2020 Stuart Doole , Kumar Neeraj , Vishad Bhalodia Learn MoreWe 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
Dec 16, 2020 Manuel Rueda , Gaurav TrivediFactor Investing , ESG Research
Learn MoreTelehealth 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
Dec 14, 2020 Saurabh Katiyar , Ashish Lodh Learn MoreKuwait’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
Dec 11, 2020 Jean-Maurice LadureGlobal Investing , Emerging Markets , Economic Exposure
Learn MoreDespite 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 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
Dec 2, 2020 Devika Ghate , Kumar Neeraj , Wei Xu Learn MoreChina’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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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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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
Nov 19, 2020 Monika Szikszai , Thomas VerbrakenFixed Income , Risk Management
Learn MoreWill 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
Nov 18, 2020 Dimitris Melas , David Lunsford , Andy SparksFactor Investing , Risk Management , ESG Research
Learn MoreTo 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?
Nov 16, 2020 Roman KouzmenkoFactor Indexes , Factor Investing , Factors
Learn MoreGood 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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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?
Nov 12, 2020 Greg Recine , Juan Sampieri , Andy SparksGlobal Investing , Risk Management
Learn MoreGlobal 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
Nov 11, 2020 Rohit Mendiratta , Hitendra D Varsani , Guido GieseESG Research , Risk Management
Learn MoreHow 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
Nov 3, 2020 Greg Scheuer , Andy SparksFixed Income , Risk Management
Learn MoreWith 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?
Oct 30, 2020 Zhen WeiEmerging Markets , Global Investing
Learn MoreIn 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?
Oct 27, 2020 Will Robson , Niel HarmseReal Estate Investing , Risk Management
Learn MoreInfrastructure 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
Oct 22, 2020 Stuart Doole , Véronique Menou , Kumar NeerajESG Research , Global Investing
Learn MoreInstitutional investors are under pressure to align their strategies with a maximum global temperature increase of 1.5oC 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
Oct 19, 2020 Chenlu ZhouEquity Themes , Risk Management
Learn MoreHeaded 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
Oct 15, 2020 Abhishek Gupta , Ashish Lodh , Subhajit BarmanFactor Investing , Factor Indexes , Factors , Risk Management
Learn MoreSingle-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
Oct 14, 2020 Donald SzeFactor Indexes , Factor Investing , Factors
Learn MoreFactors 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
Oct 2, 2020 Hitendra D Varsani , Waman VirgaonkarFactor Investing , Global Investing , Risk Management
Learn MoreGlobal 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?
Sep 30, 2020 Hamed Faquiryan , Manuel RuedaFixed Income , Risk Management
Learn MoreWe 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?
Sep 29, 2020 Yihai YuFixed Income , Risk Management
Learn MoreAs 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
Sep 24, 2020 Thomas Verbraken , Daniel SzaboFixed Income , Risk Management
Learn MoreMarket-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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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
Sep 14, 2020 Olga EmelianovaESG Research , Global Investing
Learn MoreFive 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
Sep 11, 2020 Bryan Reid , Niel HarmseReal Estate Investing , Fixed Income
Learn MoreSome 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
Sep 10, 2020 Abhishek Gupta , Ashish Lodh , Subhajit BarmanFactor Indexes , Factor Investing , Factors
Learn MoreHow 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?
Sep 2, 2020 Joy Zhang , Yihai YuFixed Income , Integrated Risk Management
Learn MoreWill 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?
Aug 27, 2020 Mario López-AlcaláESG Research , Emerging Markets , Global Investing
Learn MoreMexican 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
Aug 26, 2020 Saurabh Katiyar , Reil Abucay , Chirag GosarEmerging Markets , Global Investing , Risk Management
Learn MoreInstitutional 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
Aug 26, 2020 Juan Sampieri , Andy SparksIntegrated Risk Management , Fixed Income , Global Investing , Risk Management
Learn MoreAggressive 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
Aug 19, 2020 Alex Johnson , Simon MinovitskyFactor Investing , Risk Management , Global Investing
Learn MoreWhen 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
Aug 17, 2020 Mehdi AlighanbariFactor Indexes , Factor Investing , Factors
Learn MoreGrowth 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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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
Aug 4, 2020 Zhen WeiGlobal Investing , Emerging Markets
Learn MoreGiven 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
Jul 29, 2020 Juan Sampieri , Andy SparksFixed Income , Risk Management
Learn MoreInvestors 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
Jul 20, 2020 Rohit Mendiratta , Hitendra D VarsaniESG Research , Factor Indexes , Factor Investing , Factors , Fixed Income , Risk Management
Learn MoreCOVID-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
Jul 15, 2020 Bruno Rauis , Zoltán NagyESG Research , Global Investing
Learn MoreInstitutional 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
Jul 14, 2020 Howard Zhang , Daniel R. Barrera , Manuel Rueda Learn MoreIt’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
Jul 10, 2020 Hamed Faquiryan , Mario López-AlcaláESG Research , Fixed Income , Risk Management
Learn MoreClearing 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?
Jul 7, 2020 Naoya Nishimura , Shuo XuESG Research , Emerging Markets , Global Investing
Learn MoreESG 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?
Jul 6, 2020 Hitendra D Varsani , Waman Virgaonkar , Rohit MendirattaFactor Investing , Risk Management
Learn MoreAs 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?
Jul 1, 2020 Andy Sparks , Gergely SzalkaFixed Income , Risk Management
Learn MoreIn 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?
Jun 29, 2020 Saurabh Katiyar , Ashish Lodh , Vishad BhalodiaFactor Investing , Global Investing
Learn MoreBuilding 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
Jun 29, 2020 Zoltán Nagy , Linda-Eling Lee , Guido GieseGlobal Investing , ESG Research
Learn MoreOur 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
Jun 24, 2020 Vipul Jain , Roman Kouzmenko Learn MoreGiven 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
Jun 23, 2020 Fritz Louw , Niel HarmseReal Estate Investing , Risk Management
Learn MoreMany 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
Jun 22, 2020 Guido Giese , Zoltán Nagy , Linda-Eling LeeGlobal Investing , ESG Research
Learn MoreVery 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.
Jun 15, 2020 Linda-Eling Lee , Guido Giese , Zoltán NagyGlobal Investing , ESG Research
Learn MoreThe 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?
Jun 11, 2020 Yini Yang , Jian Chen , Joy ZhangRisk Management , Fixed Income
Learn MoreAfter 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
Jun 3, 2020 Shuo Xu , Zhen WeiEmerging Markets , Global Investing
Learn MoreMarket 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
Jun 1, 2020 Zhen Wei , Shuo XuFactor Indexes , Factor Investing , Global Investing
Learn MoreThough 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?
May 29, 2020 Yini Yang , Joy ZhangFixed Income , Risk Management
Learn MoreMachine 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
May 27, 2020 Stuart DooleGlobal Investing , ESG Research
Learn MoreHow 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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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?
May 21, 2020 Thomas Verbraken , Juan SampieriFixed Income , Risk Management
Learn MoreOur 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
May 19, 2020 Dimitris MelasESG Research , Factors , Global Investing
Learn MoreCOVID-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
May 18, 2020 Michael HayesRisk Management , Fixed Income
Learn MoreRisk 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
May 13, 2020 Abhishek Gupta , Pavlo Taranenko , Sebastien LieblichGlobal Investing , Emerging Markets
Learn MoreSignificant 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
May 11, 2020 Yini Yang , Jian Chen , Joy ZhangEmerging Markets , Fixed Income , Global Investing , Risk Management
Learn MoreBeyond 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
May 8, 2020 Donald Sze , Navneet KumarFactor Investing , Factors , Risk Management
Learn MoreHow 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
May 6, 2020 Hamed Faquiryan , Reka Janosik , Andras RokobFixed Income , Risk Management
Learn MoreAs 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
May 5, 2020 Alfredo Bequillard , Greg RecineFixed Income , Risk Management
Learn MoreDespite 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
May 4, 2020 Hitendra D Varsani , Rohit MendirattaEmerging Markets , Global Investing , Risk Management
Learn MoreWe’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
Apr 29, 2020 George Bonne , Jun WangFactor Indexes , Factor Investing , Factors
Learn MoreCan 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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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
Apr 22, 2020 Zoltán Nagy , Guido GieseESG Research , Emerging Markets , Global Investing
Learn MoreThe 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
Apr 21, 2020 Greg Scheuer , Andy SparksFixed Income , Risk Management
Learn MoreDramatic 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
Apr 17, 2020 Mehdi AlighanbariFactor Investing , Factor Indexes , Factors
Learn MoreWhile 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?
Apr 16, 2020 Raina Oberoi , Abhishek Gupta , Jean-Maurice LadureEmerging Markets , Factor Indexes , Factor Investing , Factors , Global Investing
Learn MoreWhether 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?
Apr 15, 2020 Yihai Yu , Joy ZhangRisk Management , Fixed Income
Learn MoreThe 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
Apr 14, 2020 Meghna MehtaESG Research , Fixed Income , Global Investing
Learn MoreAs 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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