Showing 3521 - 3530 of 3,535 entries
Research PaperCombining E, S, and G Scores: An Exploration of Alternative Weighting Schemes
How an overall ESG rating is constructed can significantly impact its usefulness. We tested two approaches: equal weighting and backward optimization. Equally weighting E, S, and G pillar scores across sectors showed less financial significance than the stand-alone G pillar score — that is, without E and S scores — over the 13-year study period. Backward optimization showed greater significance than stand-alone G scores but may underestimate the importance of ESG indicators to financial...
Research PaperModel Insight - The Barra Emerging Markets Model Empirical Notes - February 2014
This Model Insight provides empirical results for the new Barra Emerging Markets Model, including detailed information on the structure, the performance, and the explanatory power of the factors. Furthermore, these notes also include backtesting results and a thorough side-by-side comparison of the forecasting accuracy of the new Emerging Markets Model and the Global Equity Model (GEM3).
Research PaperComparing Risk and Performance for Absolute and Relative ESG Scores
ESG investing is undergoing a pivotal shift. Investors are increasingly moving away from asking “if” ESG can add value to their strategies, and toward questions of “how” and “where.” As investors debate whether an absolute or industry-relative score may serve them better, we tested how these different ESG signals correlated with financial performance. Both scores correlated with higher profitability characteristics and lower levels of idiosyncratic and stock-specific risk. The...
Research PaperResearch Insight - Factor Indexes in Perspective: Insights from 40 Years of Data Part I: Study - September 2014
Until recently, MSCI had calculated 25 years of simulated history for its factor indexes. In this Research Insight, we extend the simulated history to 40 years, providing new insights into the behavior of factor indexes over various time periods. We look at factor index behavior over various time frames; the changes in the correlation between factor returns over this period; historical variations in valuation of factor indexes and their exposure to GICS sectors. We also use IndexMetrics,...
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...
Research PaperFoundations of ESG Investing in Corporate Bonds
Environmental, social, and governance (ESG) investing is a very broad field with many different investment approaches addressing various investment objectives across asset classes. While there are many studies relating to ESG in equities, the risk assessment of ESG considerations within fixed income may be equally if not more important. Bonds have limited upside, but in a negative scenario, investors can potentially lose all their invested capital. At a top level, we can break down ESG...
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.