Comparing Barra US Equity Model (USE3) to Barra US Equity Model (USE4): Portfolio Construction and Turnover

Join author Rachael Smith, Senior Associate, Applied Analytics Research, as she presents the research of her paper, Comparing USE3 and USE4: Portfolio Construction and Turnover, investigating the turnover and forecasting accuracy of optimized portfolios generated using USE4S, and compares them with those generated using the model's predecessor, USE3S. By testing various investment strategies, rebalancing on a daily or weekly basis, research uncovered no systematic turnover, and in fact, the USE4S risk forecasts were found to be more accurate.

This webinar will review the methodological enhancements introduced in the new Barra US Equity Model (USE4) and how they are designed to improve risk forecasts for optimized portfolios.

Agenda Topics Include:

• Comparison of monthly variability of volatility forecasts at the factor level between models with different investment horizons as well as models with and without the volatility regime adjustments
• Analysis of the turnover differences across models using daily and weekly rebalancing for common investment strategies will be presented as well as the trade-off between risk forecast accuracy and turnover