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Mehdi Alighanbari

Mehdi Alighanbari
Executive Director, MSCI Research

About the Contributor

Mehdi Alighanbari is an Executive Director and Factor Strategist in the Core Equity Research team. The team conducts proprietary research and strategic product development to address clients’ investment problems. Previously, Mehdi served as an equity derivatives strategist at Deutsche Bank. Mehdi has a PhD in Aeronautics and Astronautics from the Massachusetts Institute of Technology and also holds MScs in Electrical Engineering, Aeronautics and Astronautics and Operations Research.

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Contributions by Mehdi Alighanbari

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  1. BLOG

    The Theory of (Value) Relativity 

    May 5, 2021 Waman Virgaonkar , Mehdi Alighanbari

    Factor Investing

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    Whether constructing a fundamental factor model, a value strategy or a value index, valuation ratios need context. Time-series and cross-sectional approaches each have pros and cons. But combining the two may have presented a clearer picture. 

  2. BLOG

    Bringing Value to the 21st Century 

    Apr 28, 2021 Mehdi Alighanbari , Arihant Jain , Saurabh Katiyar , Katiyar Saurabh

    Factors , Global Investing

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    In the second post in our series, we further probe value’s underperformance over the past decade and ask if the historic definition of value remains relevant. We specifically look at whether a company’s valuation can be enhanced by reflecting R&D investments. 

  3. BLOG

    Value-Performance Anxiety 

    Mar 23, 2021 Mehdi Alighanbari , Saurabh Katiyar

    Global Investing , Factor Investing

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    Despite a recent performance lift, many still ask whether the value factor is broken. We analyze the reasons behind its underperformance and start exploring the potential of updates to value definitions and approaches to value-portfolio construction.

  4. The low-rate environment of recent years has affected institutional investors across the spectrum, particularly the insurance sector, which has traditionally allocated a large portion of assets to fixed income. Lower returns from fixed income of late has meant some insurers have had to revise their asset allocations toward assets such as equities.

    While equities can potentially increase long-term performance, their returns have been more volatile than those of bonds, even over longer horizons — and insurers may have strict limitations on their allocation to equities. Is there an efficient way for an insurance company to include equities in their investment strategy?

  5. BLOG

    Growth Without the Side Effects 

    Aug 17, 2020 Mehdi Alighanbari

    Factor Indexes , Factor Investing , Factors

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    Growth has sometimes been viewed as the opposite of value. By extending the concept of growth at a reasonable price, we were able to capture the growth premium without it being lost to unintended factor exposures.

  6. BLOG

    Resilient stocks during the dog days of March 

    Apr 17, 2020 Mehdi Alighanbari

    Factor Investing , Factor Indexes , Factors

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    While many stocks were in the red in mid-March, as COVID-19 and oil-market shocks took hold, some were “redder” than others. We examine global markets to better understand the characteristics of the more resilient stocks during this period.

  7. BLOG

    Growth’s recent outperformance was and wasn’t an anomaly 

    Sep 20, 2019 Mehdi Alighanbari , Shubhangi Sharma

    Factor Investing , Factor Research Group , Factors

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    Growth strategies have outperformed value strategies in recent years. Is growth’s recent performance an anomaly when we look at it in a long-term context? The answer: It depends on what you mean by a growth strategy.

  8. PAPER

    A defensive approach to factor portfolios 

    Sep 10, 2019 Mehdi Alighanbari , Shubhangi Sharma

    Factor and Risk Modeling , Performance Analysis , Risk Management

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    Low-volatility indexes have been attractive to some investors, mainly due to their defensive and low-risk characteristics. This has been especially true in times of market uncertainty and heightened volatility. In this paper we investigate the possibility of incorporating the defensive characteristics of the MSCI Minimum Volatility Indexes into the construction of other factor indexes with the aim of achieving the highest “factor exposure-to-risk ratio.”

  9. While used extensively by active managers as part of their security-selection decisions, the growth factor has been largely left out of the factor-index investing landscape, at least in its simplest form. This paper explores why and offers a way to capture this factor with a systematic, rules-based approach.

  10. BLOG

    What has affected minimum volatility index performance? 

    Jan 31, 2019 Mehdi Alighanbari , Waman Virgaonkar

    Factor Indexes , Factors , Factor Investing

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    As we head further into 2019, some of last year’s concerns, including market volatility and interest-rate uncertainty, continue to occupy investors’ minds. With the assumption that rates-related concerns continue and uncertainty looms in the global equity markets, the question is how minimum volatility indexes behaved in an environment dominated by these two opposing forces.

  11. 2018 marked the 10-year anniversary of the MSCI Minimum Volatility Indexes. Launching just prior to the global financial crisis, which caused sharp equity market falls, and the indexes’ behavior “out-of-sample” since launch have led to adoption by a large number of asset owners and the indexes’ serving as the basis for a wide range of ETFs that have gathered significant assets. Here, we contrast 10 years of live data with the previous 10 years of backtesting, investigating changes in the indexes’ behavior before and after launch across regions. Finally, we answer some of the most common questions clients have asked.

  12. As the more alarmist discussion of factor meltdowns due to crowding has dissipated, institutional investors have turned toward understanding the investment capacity of factor-based strategies. The key question is to gauge how much capital can be invested in funds that replicate factor indexes before their return expectations diminish to unattractive levels. In this Research Insight, we use characteristics of factor indexes to gauge their capacity, using the MSCI Minimum Volatility Index as a case study. Our analysis suggests practical ways that factor investors can modify their strategies to reduce their factor footprint, without affecting their ability to capture the desired factor exposure.

  13. Institutional investors are moving toward integrating ESG criteria into their portfolios and their factor allocations in particular. But they face key challenges in doing so: How can they enhance their strategies’ ESG profiles while achieving the desired exposure to their target factors? Our research shows this can be achieved by simultaneously incorporating ESG integration alongside factor exposure targeting in index construction. The MSCI Factor ESG target indexes’ “one-step” approach achieved significant improvement of the ESG profile of a single- or multi-factor index relative to its market-cap-weighted parent with modest or no negative impact on the indexes’ ability to capture factor return premia over the December 2007 to June 2017 study period.

  14. PAPER

    Research Insight - Constructing Low Volatility Strategies - January 2016 

    Jan 25, 2016 Lokesh Mrig , Stuart Doole , Durga Shankar , Mehdi Alighanbari

    Factor and Risk Modeling , Investing (Investment Management) , Portfolio Construction and Optimization

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    Low volatility is one of the few factors that have historically performed well in turbulent markets. Moreover, over long periods of time, this defensive strategy has produced a premium over the market, contravening one of the most basic theories in finance — that one should not be rewarded with greater returns for taking less than market risk. Since the global financial crisis hit in 2008, low volatility has garnered increased attention from institutional investors. In this paper, we explore both rules-based and optimization-based approaches to constructing low volatility strategies.

  15. PAPER

    Research Insight - Multi-Factor Indexes Made Simple - November 2014 

    Nov 19, 2014 Chin Ping Chia , Mehdi Alighanbari

    Factor and Risk Modeling , Investing (Investment Management) , Portfolio Construction and Optimization

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    Multi-factor index fund allocations are increasingly becoming the preferred approach to factor investing. In this paper, we examine the return/risk characteristics of nine static and dynamic weighting strategies over a 36-year period. The results highlight that a simple strategy that equal weights multiple factor indexes has historically proved more effective than many of the more complex approaches - pointing to its potential as a way to combine factors, especially in the absence of active investment views and skills. However, a dynamic factor weighting strategy based on fundamental signals also has merit if the investor believes she has the insight or skills required.

    Read the Spotlight

  16. PAPER

    Research Spotlight - MSCI Factor Indexes in Perspective: Insights from 40 Years of Data - September 2014 

    Sep 18, 2014 Padmakar Kulkarni , Subramanian Aylur , Mehdi Alighanbari

    Factor and Risk Modeling , Investing (Investment Management) , Performance Analysis , Portfolio Construction and Optimization

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    With Research Spotlight - MSCI Factor Indexes in Perspective:Insights from 40 Years of Data, we launch our new publication called the Research Spotlight. IEach paper in the series, we will focus on the key findings of a longer white paper, summarizing the research for a non-technical audience. While certain readers will be drawn to the longer publication for the full scope of the study, the Research Spotlight affords a quick and focused summary for those interested in a concise overview.

    Until recently, MSCI had calculated 25 years of simulated history for its factor indexes. In this Research Spotlight, 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, MSCI's analytical framework, to investigate various characteristics of factor indexes, such as risk, return, liquidity, investability and cost. This part contains supplementary data only.

  17. PAPER

    Research Insight - Factor Indexes in Perspective: Insights from 40 Years of Data Part II: Supplementary Materials - September 2014 

    Sep 8, 2014 Subramanian Aylur , Mehdi Alighanbari , Padmakar Kulkarni

    Factor and Risk Modeling , Investing (Investment Management) , Performance Analysis , Portfolio Construction and Optimization

    Download Document

    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, MSCI's analytical framework, to investigate various characteristics of factor indexes, such as risk, return, liquidity, investability and cost. This part contains supplementary data only.

  18. PAPER

    Research Insight - Factor Indexes in Perspective: Insights from 40 Years of Data Part I: Study - September 2014 

    Sep 8, 2014 Subramanian Aylur , Mehdi Alighanbari , Padmakar Kulkarni

    Factor and Risk Modeling , Investing (Investment Management) , Performance Analysis , Portfolio Construction and Optimization

    Download Document

    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, MSCI's analytical framework, to investigate various characteristics of factor indexes, such as risk, return, liquidity, investability and cost.

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