Showing 3951 - 3960 of 4,576 entries
Research ReportCurrency Hedging: Adapting to Volatility
In the past, institutional investors largely ignored currency hedging in their international equity portfolios. With the globalization of the equity portfolio and recent market volatility, they no longer can afford to do so. However, how to hedge foreign-exchange exposure is receiving renewed scrutiny. Static hedges have delivered higher risk-adjusted returns compared with unhedged portfolios over a long-term horizon. The static hedge, however, faces challenges in adapting to changing market...
Research ReportStress Testing a China Hard Landing
The persistent decline in Chinese equities and commodity prices this summer renewed investor concerns about a possible economic hard landing in the Asian giant. Combining the MSCI Macroeconomic Risk Model with RiskManager’s predictive stress testing capabilities, we illustrate how investors can quantify the potential impact of a China hard landing on global multi-asset class portfolios. We design two stress test scenarios: a medium contagion scenario and a high contagion scenario. Under the...
Risk Management Analytics RiskMetrics RiskManager
Research ReportConstructing a Credit Value Strategy using the BarraOne Optimizer
This document presents a case study describing the specific workflow used to set up the credit value strategy discussed in the paper Navigating Central Bank Intervention in Corporate Bond Markets (Sparks and Sharp 2017). It futher analyzes the impact of the European Central Bank's corporate bond program from the perspective of a hypothetical asset manager pursuing a credit value strategy in euro-denominated corporate debt.
Research ReportThe Road Toward a Seamless Global Real Estate Portfolio
Real estate investors can analyze performance of direct real estate in detail. However, listed real estate, which includes public REITs, rarely offers detailed data, making it challenging to monitor a portfolio consisting of both private and public assets. Two developments are focusing issue: 1) real estate will constitute a new GICS® sector as of August 31 and 2) many asset owners seek to globalize their real estate portfolios: adding international listed securities is a simple and...
Indexes Real Estate Products & Services
Research ReportMarket Insight - Macro-Sensitive Portfolio Strategies: Pricing and Analyzing Macro Risk - April 2013
Our previous papers in this series showed that cash flow betas relative to economic growth vary by asset class and portfolio type. In this paper, we show that assets with higher cash flow betas receive a higher long term return, and that return is a compensation for the macro risk exposure. We label those holdings risk premium assets. We further show that long‐term portfolio risk can be attributed to multiple macro factors, such as persistent shocks to real GDP, and inflation. We show...
Research ReportMarket Insight - Macro-Sensitive Portfolio Strategies and Defining Macroeconomic Risk - November 2012
Global economic conditions have seen a weak recovery since 2008, with major economies experiencing sub-par growth rates relative to long-term trend growth. As a result, investors are interested in designing portfolio strategies that explicitly recognize macroeconomic risk. The design of macro-sensitive portfolio strategies relies on how we define macroeconomic risk and measure the relationship between asset prices and macroeconomic risk. In this paper — the first in a series that...
Research ReportModel Insight - Predicting Risk at Short Horizons - January 2013
Predicting risk at short horizons requires a delicate balance between two effects. On the one hand, it is best to give more weight to recent observations, as these contain the most relevant data; on the other hand, giving too much weight to recent observations can lead to increases in sampling error. In this paper, we study how to optimally balance these two effects through appropriate model calibration. Central to this challenge is the identification of a reliable measure of risk forecasting...
Portfolio Management Analytics
Research ReportUnderstanding Credit Risk Transfer Transactions
In 2013, Fannie Mae and Freddie Mac began issuing unsecured debt notes linked to residential mortgages. The aim was to transfer credit risk from the agencies’ mortgage books and to reduce taxpayers’ risk, in accordance with the Federal Housing Finance Agency’s Conservatorship Strategic Plan. Called credit risk transfer transactions (“CRTs”), these are similar to non-agency residential mortgage-backed securities in many respects. This paper introduces the basics of CRTs and...
Research ReportModeling Future Shocks: MSCI Best Practices for Predictive Stress Testing
The aftermath of the 2008 global financial crisis taught the risk industry that expert judgment and economic insight may help investors anticipate and avoid exposure to major financial downturns by using forward-looking models, such as predictive stress tests. But there is no consensus on how to create these scenarios. In this paper, we portray MSCI best practices for stress testing in a flowchart that guides risk managers through a series of steps that lead to a structured way of stress...
MethodologyMSCI Fixed Income Data Methodology