Showing 3451 - 3460 of 3,461 entries
Research PaperIntroducing Multiple Horizon Versions of the Canada Equity Model (CNE4) - Research Notes
This report introduces the new multiple horizon versions of the Barra Canada Equity Model (CNE4) - Canada Equity Model Short Term (CNE4S) and Canada Equity Model Long Term(CNE4L). Both versions use daily returns data while accounting for serial correlations in aggregating daily factor returns to longer horizons. The new multiple horizon models provide more responsive risk forecasts than the existing model,CNE4. In addition to using higher frequency returns the new multiple horizon models also...
Research PaperIn Search of Global Diversification: Developed and Emerging Markets
Using monthly data from 1991 through 2004, we find evidence for dramatic convergence in properties of globally aggregated developed and emerging markets, greatly limiting the diversifying power of passive emerging markets investing. However, although equity returns in an 'average' emerging market follow the rest of the world more closely than a decade ago, emerging markets still constitute a dynamic and heterogeneous investment environment. We re-confirm that, given the importance of country...
Research PaperFixed Income Risk Modeling
Comprehensive overview of the use of factor models for fixed income risk modeling.
Research PaperThe Road to Retirement
Defined Contribution (DC) plans are rapidly becoming the primary retirement investment vehicle for a majority of employees across the US and other markets around the globe. Asset allocation for DC plans has to strike a balance between growth and protection assets over the savings lifecycle while protecting the long-term purchasing power of the nest egg. Due to the long duration of retirement investing and various risks associated with it, implementing the right asset allocation has become...
MethodologyMSCI Corporate Events Methodology
Research PaperModel Insight - The Barra Europe Equity Model (EUE4) - April 2013
This paper provides empirical results for the new Barra Europe Equity Model (EUE4), including details on factor structure, commentary on the performance of select factors, analysis of the explanatory power of the model, and an examination of the statistical significance of the factors. Furthermore, these notes include a side-by-side comparison of forecasting accuracy for EUE4 and EUE3.
Research PaperA Prepayment Model for the Danish MBB Market
We developed an Implied Prepayment model to calculate spread values and effective Durations for Danish Mortgage Backed Bonds (MBB). By using an implied prepayment model, constructed by fitting a generic functional form to market prices of liquid Danish MBB, we take the market price of prepayment risk into account and produce consistent results. Since only current pricing data are used as a model input this approach does not require access to a historical database of prepayment data. This will...
Research PaperFactor Models and Fundamentalism, MSCI Barra Newsletter, Summer 2006
Guy Miller compares Fundamental, Statistical, and 'Hybrid' Equity Factor Risk models. He discusses when the different types work best and when they are likely to fail in risk management and portfolio construction. When statistical factors are used to extend a fundamental factor model, we see modest improvements in risk forecasting. The improvement in portfolio optimization seems even slighter and should be applied only with caution
Research PaperDynamic Volatility and its Implications for Portfolio Management
A discussion on the implications of changing volatility levels on active and passive portfolio management. In the Summer 2005 Horizon Newsletters, we examined the sources of cross-sectional volatility in the Japan market. We extend the study to Europe and the US market and simulate the impact of dynamically changing volatility levels on active portfolio risk. We show that the optimal level of tracking error, the size of active exposures, and the optimal number of securities vary wildly with...
Research PaperExploring Default Swap Spread Variation
We assess the effectiveness of the Barra Default Probability (BDP) model in explaining the cross-sectional variation of Credit Default Spreads. In order to establish the usefulness of the BDP model in forecasting real-world defaults, we test it against historical default experience. We find that the model shows good default discriminatory power relative to agency ratings.