Introducing MSCI IndexMetrics - An Analytical Framework for Factor Investing
categories: Indexes, Research Paper, Indexes, KOUZMENKO Roman, GUPTA Abhishek, KASSAM Altaf, SAURABH Jain
Factor investing aims to capture exposures to various equity risk premia. For that, investors need a standardized approach to assess whether a factor investment meets their objectives along the dimensions of performance, exposure, investability, and, for multi-factor investments, combination effects (diversification and turnover reduction). MSCI has created the "IndexMetrics" analytical framework to address this need and to help bring transparency to multi-factor allocations.
In this, the third paper of the series, we describe IndexMetrics, which turns the concepts laid out in the first two papers into a set of actionable and concrete quantitative metrics along the dimensions of performance, exposure, investability, and combination effects.