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Showing 51 - 100 of 296 entries

  1. BLOG

    U.S. real yields: opportunities and warning signs 

    Dec 12, 2018 Andy Sparks

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    Despite the recent rally in the U.S. government bond market, real U.S. bond yields (i.e., nominal yield minus the market-implied rate of inflation) still remain substantially higher than at the beginning of the year. This may be both a blessing and a curse for investors.

  2. BLOG

    Factor investing goes multi-asset class 

    Dec 11, 2018 Peter Shepard

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    Factor investing is now going multi-asset class: to factor-based asset allocation and systematic strategy factors that push beyond equity selection.

  3. BLOG

    Investment risks in carbon-dependent industries 

    Dec 10, 2018 Manish Shakdwipee

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    Carbon-intensive industries have been the primary focus of attention for investors looking to reduce carbon-related risks in their portfolios. But these particular industries are only part of the picture. Institutional investors may want to look beyond the usual suspect carbon-intensive industries to better understand the end-to-end risks.

  4. BLOG

    Investing in convertible bonds when rates rise 

    Nov 30, 2018 Gergely Szalka

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    Is my convertible bond more like a stock or a bond? How can I identify convertible bonds offering protection from rising rates?

  5. BLOG

    What it may mean for Japanese stocks if easy money ends 

    Nov 22, 2018 Naoya Nishimura

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    Some observers are concerned that when the Bank of Japan (BOJ) eventually ends its ultra-easy monetary policy, it could hurt the Japanese stock market. Part of this concern stems from the fact that the BOJ’s unconventional monetary policy involves purchasing Japanese exchange-traded funds (ETFs).

  6. BLOG

    Managing MBS risk in a rising rate environment (Part 2) 

    Nov 21, 2018 Yihai Yu

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    Will U.S. homeowners slow down the heady prepayment rate on their mortgages — even if interest rates remain unchanged, thus potentially harming returns of mortgage-backed securities (MBS) and extending the duration of these securities?

  7. BLOG

    Small cap allocations may not be that straightforward 

    Nov 20, 2018 Abhishek Gupta

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    The low size factor, or the premium that has been historically realized by investing in smaller sized companies over longer time periods, forms an integral component of many institutional portfolios. However, investors can choose different ways to making a low size allocation.

  8. BLOG

    Sector investing in China 

    Nov 14, 2018 Anil Rao

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    As the China A shares market has evolved, investors have faced new choices. They can continue with broad allocations to the emerging markets (EM), choose slightly narrower allocations to China and other specific EM countries or consider targeted investments within China through a variety of means.

  9. BLOG

    Credit binge hangovers have historically been a challenge 

    Nov 9, 2018 David Zhang

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    Credit spreads and debt issuance are at historical levels, as credit markets show signs of overheating. History has shown that following an overheated credit market, long-term credit returns have been generally weaker, in absolute terms and relative to U.S. Treasurys; particularly for high yield (HY). Given the intensity of past credit binge hangovers, long-term investors may want to review their current asset allocation strategies.

  10. BLOG

    Which factors mattered in China? 

    Nov 7, 2018 Oleg Ruban

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    Chinese equity prices have hardly been music to investors’ ears so far in 2018. The MSCI China A Onshore IMI Index — the broadest MSCI A shares index designed to represent the performance of the overall A shares market — has declined more than 25% in local currency terms through Oct. 31, 2018. Were there factors in this market that outperformed?

  11. BLOG

    Equity markets in October – Has the tide turned? 

    Nov 5, 2018 Leon Roisenberg , George Bonne

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    October’s market sell-off reflected investors’ concerns with the sustainability of economic growth, the longer-term impact of trade tariffs and rising interest rates. In all, it seemed to be a shift away from pro-cyclical themes. Do risks remain for those areas of the market?

  12. BLOG

    Is the bond-equity hedge slipping away? 

    Nov 1, 2018 Michael Hayes , Thomas Verbraken

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    In October, the 10-year U.S. Treasury yield hit a 7-year high in response to strong economic news, contributing to the second major equity sell-off this year.1 If positive moves in yield continue to drive down equities, this would mean an end to the hedge between stocks and bonds that has been in effect since around 2002. Investors may seek alternative means of diversification, with potentially deep ramifications for strategic asset allocation decisions and multi-asset class strategies.

  13. BLOG

    What drives the capacity of factor index strategies? 

    Oct 30, 2018 Stuart Doole

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    As factor investing becomes increasingly “business as usual,” institutional investors have become keenly interested in the ability of strategies that replicate factor indexes to persistently capture desired exposures without compromising exposure to the target factor. We illustrate six index design approaches that can be used to tackle this challenge.

  14. BLOG

    Apples vs. Oranges? Core vs. Opportunistic Real Estate Funds 

    Oct 25, 2018 Amit Nihalani

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    Real estate investors sometimes treat core and opportunistic funds as if they were different asset classes. They are measured against different benchmarks and comparisons are limited by a lack of consistent data. But a comparison of the two shows that both core and opportunistic funds have similar return profiles — it’s the magnitude of their returns that has varied over time.

  15. BLOG

    Hedge Fund returns: Is fund selection important? 

    Oct 22, 2018 Yang Liu

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    Many investors view hedge funds as a way to generate returns uncorrelated with other parts of the portfolio. We found that performance and sources of performance varied, but that exposure to traditional and factor investing strategies accounted for the majority of a typical hedge fund’s returns. Should hedge fund investors pay particular attention to fund selection?

  16. BLOG

    Are Argentina and Turkey just the first dominoes to fall? 

    Oct 17, 2018 Limin Xiao , Thomas Verbraken

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    Argentina and Turkey have experienced sharp corrections in their currency and debt markets over the past couple of months, leading investors to worry about possible contagion to other emerging-market (EM) countries. Are other emerging markets heading in the same direction?

  17. BLOG

    Did FAANG stocks lead the US stock market drop? 

    Oct 15, 2018 Andrei Morozov , Jun Wang

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    Fears of a global slowdown have sent U.S. stock markets plummeting recently. Given FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) have been a dominant force in driving U.S. market performance higher over the past few years, did these stocks lead the market’s downward trajectory?

  18. BLOG

    Quitting tobacco stocks without going through withdrawal 

    Oct 15, 2018 Zoltán Nagy

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    Despite strong headwinds, including renewed divestment pressure,1 the tobacco industry has proved quite resilient financially and outperformed the stock market over the past 18-1/2 years. So much so, that some institutional investors are now thinking of lifting tobacco bans in their investment policies. We found that most of the gains associated with holding tobacco stocks over this period were not specific to the tobacco industry, and could have been obtained in other ways. We also show it would have been possible to divest from tobacco without taking a hit to portfolio performance during our sample period.

  19. BLOG

    Is MBS refinance risk increasing? 

    Oct 12, 2018 Joy Zhang

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    With the Federal Reserve raising interest rates and the majority of agency mortgage-backed securities (MBS) under the refinance threshold, how much do investors need to worry about refinance risk? Our model indicates that future refinance regimes would be similar to recent 2016 experiences, and this view is consistent with current behavior of MBS empirical durations. However, investors may want to remain vigilant, as the recent trend toward looser mortgage credit standards by agencies and regulators could increase the prepayment intensity of future refinance waves.

  20. BLOG

    How the low volatility factor has performed in China A shares 

    Oct 11, 2018 Zhen Wei

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    Which factors have performed best in the China A market, especially given its relatively high annualized market volatility? Is there too much risk to bear? We investigate the role that the minimum volatility factor has played.

  21. BLOG

    China A shares: The journey continues 

    Oct 10, 2018 Chin Ping Chia

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    As China continues to open its capital markets to global investors and accessibility standards have improved, MSCI recently launched a consultation to explore increasing the weight of A shares in the MSCI Emerging Markets Index. Ultimately, we seek to reflect the full investable opportunity set — all of China accessible to global investors — in the benchmark, as we do in all MSCI Global Investable Market Indexes.

  22. BLOG

    How can active managers add factors to the portfolio? 

    Oct 2, 2018 Dimitris Melas

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    Discretionary managers use fundamental analysis to select stocks and construct portfolios that seek to beat the market. These managers face substantial headwinds in the current environment. From a business perspective, they are under pressure to reduce cost and improve performance. The market environment has also been challenging, as high correlations between stocks and the dominance of a handful of large technology companies have made it harder to generate alpha from stock selection.

  23. BLOG

    Managing Risk Over Different Investment Horizons 

    Sep 25, 2018 Jun Wang , Andrei Morozov

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    Given high market valuations, some investors worry that a market pullback may be at hand. We saw markets gyrate earlier this year — what if volatility returns? How investors respond to changing market conditions may depend on their time horizons.

  24. BLOG

    Corporate disclosure in a TCFD world 

    Sep 24, 2018 Laura Nishikawa

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    In June of 2017, the Task Force on Climate-related Financial Disclosure (TCFD) released climate-related disclosure recommendations to companies and investors that included a framework for better company disclosure and a request for climate scenarios as part of that disclosure. But for investors looking to incorporate environmental risk into their process, there might be a pretty big catch: We mapped over 140 MSCI ESG Research climate-related data points to the TCFD framework and found a significant gap between what investors need to know under these recommendations and what companies are telling them.

  25. BLOG

    GICS changes: Risk depends on how it’s measured 

    Sep 21, 2018 Daniel R. Barrera

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    As some very large companies switch sectors because of changes to the Global Industry Classification Standard (GICS®) structure, there will likely be implications for investors. We looked at how these changes may affect the risk profiles of six of the largest reclassified companies.

  26. BLOG

    Managing MBS risk in a rising rate environment (Part 1) 

    Sep 17, 2018 Yihai Yu

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    Bond investors lost $1 trillion during “the great bond massacre”1 of 1994, which was triggered by the Federal Reserve’s aggressive tightening of interest rates. Many U.S. mortgage-backed securities (MBS) investors and broker-dealers misjudged the risk that fixed-rate prime mortgage borrowers would defer prepayments due to market conditions. This risk — known as “extension risk” — means that borrowers may hold onto mortgages longer than previously expected.

  27. BLOG

    Global real estate: To hedge, or not to hedge 

    Sep 12, 2018 Will Robson , Bryan Reid

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    While not quite as profound as the Shakespearean original, it is still quite a tricky one for real estate investors to grapple with. Until fairly recently, it is one that has been avoided by the majority of real estate investors due to their heavy home bias. But the increasing global nature of the asset class, combined with rising currency volatility, means the question is becoming increasingly difficult to avoid.

  28. BLOG

    Remember, US inflation is a long and winding road 

    Sep 5, 2018 Andy Sparks

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    A remarkable calm has settled upon the U.S. bond market, with interest rate and inflation risk now at their lowest levels of the decade. This optimistic sentiment was underscored at the annual Jackson Hole, Wyoming conference where Federal Reserve (Fed) Chairman Powell highlighted that there is “…no clear sign of an acceleration (of inflation) above 2% and there does not seem to be an elevated risk of overheating.”

  29. BLOG

    Weighty matters: Going beyond stock-picking 

    Aug 30, 2018 Anil Rao

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    Fundamental equity managers have traditionally looked for an edge using various strategies and approaches. Here we examine whether it historically has been possible to manage a fund’s risk exposures without disturbing the underlying investment process.

  30. BLOG

    Is momentum a crowded trade that is starting to unwind? 

    Aug 29, 2018 George Bonne , Leon Roisenberg

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    The momentum factor has been on a tear the last year and a half. Is momentum a crowded trade that has started to unwind?

  31. BLOG

    Equity valuations resist running with the bulls 

    Aug 23, 2018 Saurabh Katiyar

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    The U.S. bull market is now the longest in history, leading the way for strong global equity returns over the 10 years since the financial crisis. What does this mean for valuations? We found that while they are high, they have not reached extreme levels. What’s more, there are distinct valuation characteristics across regions, sectors and factors that may create potential investment opportunities.

  32. BLOG

    What if credit spreads widen? 

    Aug 21, 2018 Hamed Faquiryan

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    Despite robust economic growth in the U.S., market conditions — as defined by tight spreads and high valuations — have wary credit investors on the lookout for trouble as the credit cycle matures. One area of scrutiny is BBB-rated credit, which sits in the middle of the rating hierarchy. Should spreads suddenly widen, investors may want to be prepared for a potential wave of BBB credits cascading into the high-yield market.

  33. BLOG

    Does Turkey offer lessons for managing emerging-market currency volatility? 

    Aug 15, 2018 Raman Aylur Subramanian

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    The recent 40% drop in the Turkish lira is part of a long-term trend of rising emerging-market currency volatility. Typically, investors do not hedge this exposure. Is it time to reconsider this approach?

  34. BLOG

    Did a yen for gender diversity benefit Japanese firms? 

    Aug 14, 2018 Minako Takaba

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    Do Japanese companies and shareholders have a vested interest in working toward greater numbers of female managers and board members? Our analysis finds that, much like companies elsewhere, greater diversity improved performance at Japanese firms in recent years.

  35. BLOG

    Is Japan’s “lost decade” over? 

    Aug 14, 2018 Naoya Nishimura

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    The Japanese equity market’s spectacular crash in the early 1990s is referred to as the “lost decade.” Recently, this period has been extended to include the decade that followed. Despite this, most Japanese investors continue to favor an outsized domestic equity allocation. This home bias has come with a huge opportunity cost. Since the end of 1987, the cumulative return of global stocks was over 1,400% in yen terms, while the cumulative return of Japanese stocks was only 49%.

  36. BLOG

    Why is Tesla a short-selling target? 

    Aug 13, 2018 Dimitris Melas , George Bonne

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    Elon Musk, founder and CEO of Tesla, suggested in a series of tweets that going private could help Tesla avoid the scrutiny of quarterly reporting and pressure from short selling. Do companies targeted by short sellers share common characteristics? Could factor analysis help investors identify stocks that may become short-selling targets?

  37. BLOG

    What happens if Italy leaves the EU? 

    Aug 6, 2018 Thomas Verbraken

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    With populist policies on the rise, globally, many believe Italy’s coalition government could add to the EU’s challenges by pursuing populist strategies that could further disrupt both equity and bond markets. We consider two scenarios – a severe and mild one – with very different implications.

  38. BLOG

    All FAANGs are not created equal 

    Aug 3, 2018 George Bonne

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    FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) make up nearly 40% of the NASDAQ 100 index, and smaller but significant weights in many others. Commonly grouped as tech stocks or growth companies, it seems reasonable to assume they share many similar characteristics. However, when examined through the lens of performance-driving factors, their characteristics are far from homogeneous.

  39. BLOG

    Can the right benchmark improve your vision? 

    Jul 26, 2018 Guillermo Cano

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    As interest in ESG investing continues to grow, so does the number of actively managed strategies that integrate environmental, social and governance considerations into their investment processes. However, institutional investors and managers have been benchmarking many of these ESG-tilted strategies against standard market-cap-weighted indexes. While these indexes provide a broad basis for evaluating performance, they lack the ability to provide the insights that might be gained from ESG-focused benchmarks.

  40. BLOG

    What is going on with factor returns? 

    Jul 18, 2018 Leon Roisenberg

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    Value and momentum factors typically move in opposite directions—that is, when one outperforms the market, the other usually underperforms. In June, however, both factors underperformed the market, leading some observers to question whether this change in market behavior is impairing quantitative strategies.

  41. BLOG

    Can investors win a U.S.-China trade war? 

    Jul 3, 2018 Anil Rao

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    With new tariffs in effect as of July 6, we investigate our earlier assertion that “while an expanded trade war could lead to a ‘lose-lose’ outcome, there could be greater impact for stocks in the U.S. Overall, they are more exposed to the Chinese economy than the other way around.”

  42. BLOG

    Vive la Différence: Active Factor Strategies in China A Shares 

    Jun 27, 2018 Oleg Ruban

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    Clients often ask us whether factor insights can be applied to construct equity portfolios in a particular market. They wonder whether certain market or economic characteristics might prevent factors from working: Different countries and their equity markets are at different stages of development, have different depth and may have dominant sectors.

  43. BLOG

    Can your investment strategy work with China A shares? 

    Jun 27, 2018 Zhen Wei

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    Many institutional investors have long viewed China A shares as an inefficient market, suggesting that active strategies such as stock-picking can thrive. However, researching a universe of over 3,500 stocks comes with huge challenges, and may lead investors to question whether factor-based systematic strategies could have worked well with China A shares.

  44. BLOG

    “G” is just one part of the ESG story 

    Jun 26, 2018 Panos Seretis , Meggin Thwing Eastman

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    When it comes to ESG (environmental, social and governance) investing, conventional wisdom holds that G is the only part that really matters, as a window into overall management quality and providing insights and value for investors. Our analysis suggests this has not been true; that the E and S aspects of ESG did help sort the truly outstanding firms from a group that already shares an array of robust financial traits.

  45. BLOG

    Bonds and equities: still happy together? 

    Jun 25, 2018 Andy Sparks

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    For many years now, stock and bond returns have consistently moved in opposite directions. But the timing of selloffs earlier this year in the bond and equity markets combined with inflation concerns and higher interest rates have market participants asking whether the relationship has changed.

  46. BLOG

    What’s driving high-yield spreads? 

    Jun 14, 2018 Hamed Faquiryan

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    The recent trend in high-yield market spreads appears to relate more to concern about rising rates than the potential for credit losses. However, investors should be aware that the impressive recent performance of short-dated high yield bonds and floating-rate leveraged loans may be reversed if credit conditions begin to deteriorate.

  47. BLOG

    Can China A share issuers adapt to ESG realities? 

    Jun 13, 2018 Olga Emelianova

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    Now that China A shares have partially entered some mainstream MSCI indexes, institutional investors and other stakeholders are raising questions about Chinese constituents’ ESG track records and potential risks from these new exposures in their portfolios.

  48. BLOG

    International small caps are alive and kicking 

    Jun 11, 2018 Anil Rao

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    Investors eager to write the obituary of the size premium might want to put down their pens. Small-cap stocks in developed markets outside the U.S. have been on a decade-long run of outpacing their large- and mid-cap counterparts.

  49. BLOG

    As credit risk rises, beware of selection bias in CLOs 

    Jun 1, 2018 Joy Zhang

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    Investors in the booming U.S. Collateralized Loan Obligation (CLO) market likely need to be aware of the risks: record tight spreads, deteriorating credit quality, and, as our expanded CLO data analytics reveal, selection bias risk.

  50. BLOG

    Adam Smith’s “invisible hand” and the value of benchmarks 

    May 30, 2018 Sebastien Lieblich

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    Today, there are indexes designed to represent the performance of a wide range of investment segments, including market capitalization, geography, industry and, most recently, factors. They also are used as the basis for financial products, such as exchange-traded funds or derivatives. Much like Adam Smith’s “invisible hand,” they play a critical, behind-the-scenes role, reflecting the entire market’s views on valuations, rather than those of any individual or group of individuals.

Showing 51 - 100 of 296 entries