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Controlling Idiosyncratic Risk in Value Strategies 

Factor Investing

We looked at ways to mitigate some of the performance drag of stock-specific risk on value strategies over the last decade by directly controlling for this risk without negatively affecting value-factor exposures or contributions.

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After Evergrande: Bond Liquidity of Chinese Property Developers 

Fixed Income , Risk Management , Global Investing

Evergrande, one of China’s largest and most indebted property developers, had a recent close brush with bankruptcy that generated considerable concern among global bond investors. In this time of distress, how has market liquidity responded?

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Can Green Spreads Uncover ESG's Influence on Bond Prices? 

ESG Research , Fixed Income

Investors increasingly seek to build portfolios that have reduced exposure to climate-transition risk. How might these changes in investor behavior have affected prices in the corporate-bond market?

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Focusing a Sustainability Lens on China’s Regulatory Changes 

Global Investing

Market fundamentals may not be significantly affected by new regulations in China. But, given the regulations’ focus on ESG-related issues, investors can use ESG data as they seek to identify risks and opportunities across industries and securities.

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How Climate Change Could Impact Credit Risk 

ESG Research , Fixed Income , Risk Management

Investors are increasingly focused on gauging the risks related to climate change. We investigated how various climate scenarios could impact the credit risk of portfolios. In one scenario, 16% of investment-grade issuers could migrate to high yield.

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Could Factors Help Explain Asset-Level Real Estate Performance? 

Real Estate Investing , Factor Investing

For real estate investors, property type and geography segmentations are the primary lens through which they measure and manage their portfolios. Testing five potential real estate style factors, however, were we able to better explain asset-level variation.

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How to Achieve Net Zero? Leaders Weigh In 

Global Investing

How can investors help accelerate the net-zero transition? This was the central question at MSCI’s 2021 Global Investing Conference. We present the core takeaways from the two-day event, which featured senior corporate and investment thought leaders.

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Factors in Focus: Where’s the Value in Defensive Positioning? 

Factor Investing

Throughout the third quarter, investors shifted attention to risks from inflation, tapering and potential interest-rate rises. We analyze global equities and the rotation toward defensive factors.

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Industry Momentum Across Regions 

Factor Investing

We expand on our analysis of industry momentum to assess the persistence of a premium across different regions and the ability of a rules-based strategy to help investors as they seek to capture this premium.

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The Impact of China’s New Regulations: A Thematic Lens 

Global Investing

Regulatory changes in China have investors wondering how different industries could be affected. Evaluating the changes through a thematic lens can provide insight into the growth and crowding levels of megatrends, as industries react and evolve.

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How a Shift Toward Buybacks Affected Yield Strategies 

Global Investing , Factor Investing

For investors who use yield strategies to generate income, a steady stream of dividend payments is important. But with more companies using buybacks as a way to redistribute profits, investors may want to consider a more holistic view of income.

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Building Climate-Aware Factor Portfolios 

Factor Investing

Factor investing typically involves both security selection and alternative weighting based on security-level factor exposure. If such a strategy also needs to be climate-aware, what is the cost in terms of target-factor erosion?

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A Sector-Balanced Approach to China A Mega-Cap Exposure 

Global Investing

For investors seeking exposure to the mega-cap segment of the China A market, a simple top-50 market-cap-weighted approach can lead to large sectoral biases. We explore how a balanced mega-cap approach may help.

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Sizing Up Small Caps 

Factor Investing

Given small-cap outperformance since March 2020, investors are asking how these stocks size up in terms of short-term valuation, sentiment and macro outlook? Longer term, might small caps help capture opportunities around thematic investing megatrends?

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Housing-Bubble Déjà Vu 

Risk Management

The U.S. in the past year recorded the highest national house-price appreciation in recent decades. Does the run-up in home prices represent housing-bubble déjà vu? And what can MBS investors do to assess their mortgage credit risk?

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Assessing Private Infrastructure in a Multi-Asset-Class Portfolio 

Real Estate Investing , Risk Management

Private infrastructure is a popular element of institutional capital allocations, and increased focus on renewable or carbon-neutral infrastructure may mean significant new investment opportunities. What role could it play in a multi-asset-class portfolio?

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Fresh IPO Stocks and Indexes: In or Out? 

Global Investing

Depending on a number of factors, stocks may be added to indexes soon after a company’s IPO, which can affect asset managers who use the indexes to create and benchmark portfolios. We investigate the impact of IPO stocks on index performance.

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Managing Against MBS Indexes: A Duration Perspective 

Fixed Income , Risk Management

Mortgage-backed securities constitute a significant portion of fixed-income indexes. Managing MBS portfolios against these indexes depends heavily on an understanding of the dynamics of MBS duration, especially in volatile markets.

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Could Factors Have Explained Cryptocurrency Risk? 

Factor Investing

As cryptocurrencies rise in popularity as investment vehicles, the need for standardized tools for this market increases as well. We created a multifactor model to measure whether factors important for equity markets were also important for crypto.

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Credit Strategies During the COVID-19 Crisis 

Fixed Income , Risk Management

Short-term credit spreads widened to a greater extent than long-term spreads during the March 2020 COVID-19 crisis. As a result, many U.S. corporate-issuer spread curves flattened or even inverted. What were the implications for corporate-bond investors?

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COVID-19’s Uneven Impact on Office Vacancy 

Real Estate Investing , Global Investing

What was the precise impact of the COVID-19 crisis on office properties? While the overall vacancy rate at the end of 2020 was lower than the previous cycle’s peak, the percentage of fully leased office buildings reached an all-time low.

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What Could a Rate Hike Mean for Portfolios? 

Fixed Income , Risk Management

Although the Federal Reserve may not begin raising rates anytime soon, U.S. and global markets are scrutinizing the Fed’s communications about the likely course of policy actions. We consider three scenarios for the timing of policy responses.

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Hedging Inflation with Equities 

Global Investing , Factor Investing

Equities have traditionally been viewed as a hedge against inflation, based on the assumption that companies’ revenues adjust for inflation over time. But what has been the short-term impact on equity portfolios?

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How Might Inflation Impact Funding Ratios? 

Risk Management

We analyzed two multiperiod inflation scenarios to understand how the funding ratios of defined-benefit pension funds could evolve in each and what they could mean for a pension fund in terms of special contributions over the next 10 years.

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Active-Management Opportunities in a Disperse Market 

Factor Investing

Disperse markets have historically provided opportunities for active managers to outperform their respective benchmarks. We showed that, based on historical trends, CSV helped shed light on identifying where the dispersion was greatest.

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What Can Liquidity Tell Us About ETF Prices? 

Integrated Risk Management , Risk Management

As thematic equity ETFs have grown in popularity, concerns have been raised about their liquidity — especially when an ETF holds a large fraction of a constituent’s shares. How can ETF investors get a handle on this risk? 

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Eyeing the Crowds from Multiple Perspectives 

Factor Investing

We observed historically notable crowding across factors, industries and stocks through the first half of 2021. Examining crowding from multiple perspectives and incorporating multiple data elements provides investors a more holistic view. 

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Chinese RMBS: A Way to Diversify Fixed-Income Portfolios? 

Fixed Income

The market in Chinese residential mortgage-backed securities is growing, as global investors are eying the segment’s relatively high yield and potential for diversification, but seeking improved credit ratings and transparency in data and pricing.

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Factors in Focus: Go with the Flow? 

Factor Investing

In the latest edition of Factors in Focus, we look at flows into equity factor ETFs and whether it has been profitable, historically, to follow the money, along with our analysis of factor and factor-index performance over the second quarter.

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Purifying Value 

Factor Investing

Unintended exposure to non-value factors was a large contributor to value’s period of underperformance. We investigate value-portfolio construction when controlling for these exposures while maintaining maximum exposure to value factors.

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Securitized Products’ LIBOR Transition Picking Up Pace 

Fixed Income

In 2021, there has been significant progress in the transition from the LIBOR reference rate to its replacement, SOFR. But investors in securitized products are grappling with the challenge of the LIBOR-SOFR transition and its impact on their analytics.

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CDS Fading as a Measure of Value in Emerging Markets 

Fixed Income

Credit investors use spreads to compare relative value and risk. Studies of emerging-market sovereign debt have shown that credit-default swaps tended to be a better measure of value than spreads computed from bonds. But is it still the case?

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What Can Loan-Level Data Reveal About US Auto-Loan ABS? 

Fixed Income , Risk Management

U.S. regulators required issuers by Nov. 23, 2016, to disclose data on individual loans bundled into auto-loan asset-backed securities. We looked at whether incorporating loan-level data into our model could sharpen our analysis of this ABS segment.

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Escaping to Equities for Yield 

Factor Investing

In today’s low-rate world, some investors shifted toward historically higher-yielding equities. For others, especially in the insurance industry, the greater risk limited their ability to do so. Was a minimum-variance equity approach a viable option?

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Momentum on a Value Hunt 

Global Investing , Factor Investing

Momentum, by definition, rotates into securities with recent outperformance. That said, investors who view value and momentum as contra-signals may have questions about the value-momentum convergence and the divergence of momentum and growth.

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Bitcoin: Good as Gold? 

Factors , Risk Management

During inflationary periods, equity investors, historically, have turned to gold as a hedge and diversifier. As the issue of inflation becomes more pressing, we ask whether cryptocurrencies, such as Bitcoin, could have played a similar role.

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Real Estate’s Climate-Transition Risk: The Path to Net-Zero 

Real Estate Investing , Risk Management , Global Investing

The 2015 Paris Agreement seeks to keep the rise in global temperature to well below 2 degrees Celsius above pre-industrial levels, and many governments are aiming for 1.5°C through nationally determined contributions. What are the implications for real estate markets?

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The Pressure of the Crowd: Stress Testing Thematic Indexes 

Equity Themes , Risk Management , Global Investing

Some investors may be concerned about crowding within the fast-growing thematic-investing segment. Using MSCI’s stock-crowding model, we identify crowded themes and run stress tests to understand how they might respond to an equity sell-off.

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What Really Drove Value and Growth Fund Performance? 

Factor Indexes , Factors

Many look to market-cap indexes when comparing the performance characteristics of growth and value funds — including manager skill. We found a switch to style indexes reduced industry- and style-factor contributions and made manager skill more apparent.

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Are Your Clients Ready for US Tax Day? 

Risk Management

Given the complexity of U.S. tax regulation, wealth advisers continue to grapple with how to build tax-efficient portfolios while balancing clients’ other objectives. We propose a rules-based way of doing so and analyze its benefits and trade-offs.

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Why Is Climate-Transition Risk High in High Yield? 

ESG Research , Fixed Income , Risk Management

Investors increasingly focus on building greener portfolios. Some might expect bonds to be less exposed to climate-transition risk compared to equities, due to the seniority of bonds in the capital structure. But does that logic hold at the portfolio level?

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The Theory of (Value) Relativity 

Factor Investing

Whether constructing a fundamental factor model, a value strategy or a value index, valuation ratios need context. Time-series and cross-sectional approaches each have pros and cons. But combining the two may have presented a clearer picture. 

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Bringing Value to the 21st Century 

Factors , Global Investing

In the second post in our series, we further probe value’s underperformance over the past decade and ask if the historic definition of value remains relevant. We specifically look at whether a company’s valuation can be enhanced by reflecting R&D investments. 

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Modern Slavery: The Unseen Risks 

ESG Research , Global Investing

Modern slavery occurs all over the world and can impact virtually all industries. Meanwhile, regulations requiring more detailed reporting on potential supply-chain exposure is increasing. How can investors identify portfolio holdings most at risk?

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Factor Investing Held in High-Volatility/-Concentration Period 

Factor Indexes , Factors , Risk Management

U.S. equity markets have experienced increased volatility coupled with concentration in a handful of megacap companies. Has this hampered investors’ ability to capture factors effectively? Have stock-specific risks dominated factor indexes?

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Some ESG Funds Are Not Like the Others 

ESG Research , Global Investing

ESG funds’ holdings can vary significantly, depending on their objectives, methodologies and geographic exposures. We examined the 20 largest equity funds in our coverage universe.

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Could Investment Grade Be as Risky as High Yield? 

Fixed Income , Risk Management

Do 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 

Equity Themes , Factor Indexes , Global Investing

How 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 

Fixed Income , Risk Management

For 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 

Equity Themes , Global Investing , Factor Investing

Selecting 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 

Factor Indexes , Factor Investing

Value 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 

Factor Indexes , Global Investing , Factor Investing

After 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 

Global Investing , Factor Investing

Despite 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 

Emerging Markets , Global Investing

China 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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中国专业股票配置的要点 

Emerging Markets , Global Investing

鉴于中国进一步开放金融市场，一些投资者指定了一个专门计划来负责处理与中国相关的一系列投资机会。

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Managing the Risks of LIBOR Replacement 

Fixed Income , Risk Management , Global Investing

Investors 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 

Factor Indexes , Factors , Global Investing , Factor Investing

Investors 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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Is There a Hedge-Fund-Crowding Factor? 

Factor Investing

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? 

Factor Investing , Risk Management , Global Investing

Growth 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 

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

Market 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? 

ESG Research , Global Investing

To 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 

ESG Research , Factor Investing , Factors

How 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 

Factor Investing

Using 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? 

ESG Research , Fixed Income , Risk Management

The 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 

Real Estate Investing , Risk Management , Global Investing

Global 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? 

Fixed Income , Integrated Risk Management

In 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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Are (Stock) Bubbles Rising? 

Factor Investing

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 

Fixed Income , Risk Management

An 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? 

Fixed Income , Risk Management , ESG Research

ESG 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 

Risk Management , Fixed Income

Issuance 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 

Global Investing , ESG Research

Regulators 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 

Factor Investing , Risk Management , Fixed Income

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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中国科技投资：一种股指编制方法 

Global Investing

经过数十年的快速经济增长，中国开始将发展重点从出口和固定资产投资转移到国内消费和技术创新。

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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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ESG 评级告诉我们有关公司债券的哪些信息? 

ESG Research , Risk Management

我们探讨了将环境、社会和治理相关（ESG）因素纳入考量，对公司债券投资组合风险和表现的影响。

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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 1.5oC 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 

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.