Research Paper

Integrating factors in market indexes and active portfolios

Asset owners use indexes as policy benchmarks and reference portfolios in their asset allocation. Index investors track cap-weighted indexes that seek to capture the market return. Active investors select securities and build portfolios that aim to outperform the market. All these types of investors may be able to benefit from incorporating factors into their process. More importantly, they may also be able to integrate factors without compromising other fundamentally important aspects of...

Nov 8, 2018

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Research Paper

Is There an Options Sentiment Factor?

We examine the trading activity and pricing structure in the equity options market to infer the sentiment of options traders on the underlying equity. We find that metrics constructed from the level of options trading activity relative to the underlying stock and from comparing the pricing of puts relative to calls at various moneyness levels have implications for the cross section of stock returns. Importantly, we also find that the information in options sentiment is additive and orthogonal...

Sep 4, 2018

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Research Paper

Backtesting Risk Models - August 2018

In this semi-annual update of the MSCI Model Backtesting Review, we evaluate the performance of three risk methodologies available in RiskMetrics RiskManager: Standard Normal Monte Carlo, Historical, and a new Fat-Tailed Monte Carlo methodology. The backtest was performed over the 12-month period ending June 30, 2018. Compared to previous studies, these models are tested on an extended scope of fixed income and equity portfolios, representing different segments of the U.S. and global equity...

Aug 22, 2018

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Research Paper

Anatomy of Hedge Fund Portfolios

Measuring hedge funds’ positioning and potential crowding around stocks is of interest to many investors, given these funds’ reputation for outperformance. We explore the performance of hedge fund positions using MSCI HedgePlatform, which has advantages over U.S. Form 13F filings, including monthly data points, improved timeliness and full visibility of short positions.

Jul 16, 2018

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Research Paper

Introducing Multiple-Period Optimization - June 2017

In this paper, we introduce the Multiple-Period Optimization (MPO) - a new feature in the Barra Optimizer.

Jun 30, 2018

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Press Release

MSCI Creates Factor Classification Standard by launching MSCI FaCS and MSCI Factor Box

Jan 18, 2018

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Research Paper

Introducing MSCI FaCS

Factors are important systematic sources of risk and return in equity portfolios. Given the pervasive use of factors via both active and passive strategies, a standard approach is needed for defining factors and evaluating the factor characteristics of portfolios. We introduce MSCI FaCS, a classification standard and framework for analyzing and reporting of style factors in equity portfolios that is based on the Barra Global Total Market Equity Model for Long-Term Investors. Managers can use...

Jan 18, 2018

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Research Paper

Foundations of ESG Investing – Part 1: How ESG Affects Equity Valuation, Risk and Performance

Many studies have focused on the relationship between companies with strong ESG characteristics and corporate financial performance.  However, these have often struggled to show that positive correlations — when produced — can in fact explain the behavior. This paper provides a  link between ESG information and the valuation and performance of companies, both through their systematic risk profile (lower costs of capital and higher valuations) and their idiosyncratic risk profile...

Nov 29, 2017

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Research Paper

Is There a Short Interest Factor?

We introduce a new integrated short interest factor that combines multiple dimensions of short interest. The new factor combines information on the amount of shorting activity in the securities-lending market, the available lending supply, the rates investors are paying to short a security (borrow rates) and an adjustment for shorting activity due to dividend arbitrage. We find that dividend-arbitrage strategies can create large biases in short interest factors, particularly in Europe. We...

Nov 20, 2017

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Research Paper

Backtesting Risk Models - August 2017

In this semi-annual update of the MSCI Model Backtesting Review, we began by analyzing how four types of simulation models available in RiskMetrics RiskManager — Monte Carlo, historical, filtered historical and weighted historical — performed over the past 12 months, ended June 30, 2017.

Aug 14, 2017

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