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Research PaperSummer 2006
Equity Risk Modeling: A Comparison of Factor ModelsExplaining Default Swap VariationA Prepayment Model for the Danish MBB MarketDynamic Volatility and Its Implications for Portfolio Management
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...