Research Paper

What happens when you compare the new indices to the established standards? The purpose of this article is to use  Barra's Global Equity Model to analyze newer indexes in relation to the more established indexes--not to suggest that one index is more suitable for European investment than another, but rather to highlight the differences in their characteristics. We'll perform three analyzes: The first analysis will compare the Eurotrack 100 index with the FT Europe (excluding...

Research Paper

"Can you demonstrate that your risk forecasts are better than others?" is a question                            frequently asked by Barra clients and perspective clients. This article describes Research demonstrates the superiority of the Barra factor risk  model over historical variances and covariances.

Research Paper

How does Barra's model of asset risk fit the APT and CAPM models? The APT and the CAPM are models of expected return. The CAPM is specified in a quite explicit way. The APT requires less in the way of assumptions than the CAPM, and is not explicit about actual implementation. The Barra model is designed to help investment managers forecast and control risk. It's a risk model as opposed to an expected return model. Nevertheless, the Barra model does have the same algebraic structure...

Research Paper

A new way to look at asset allocation By Arjun Divecha and Richard Grinold Barra has traditionally seen the market place as multifaceted, and we have captured those facets of the market through factors such as SIZE, VOLATILITY, SUCCESS, VALUE, GROWTH, and the like. The opposite viewpoint is the old, one-dimensional separation of stocks into large and small. Style indices represent something of a midpoint between Barra's multifaceted view of the market and the one-dimensional view. To create...

Research Paper

What is the appropriate passive benchmark or target for the fixed income portion of a pension fund? Long bonds don't seem to reward investors for the additional 'horizon' risk. Long bonds are an appropriate investment only when rates are expected to decline. The appropriate neutral position is to invest in intermediates; thus, the target portfolio or long-term benchmark should be intermediate, not long, bonds.

Research Paper

Research Paper

Floating rate notes, or "floaters," are bonds whose coupon is tied to a prevailing interest rate, such as the six-month T-bill rate. Since their coupon is not fixed, they offer investors a  unique tool to control risk and return  In particular, floaters offer a long stream of cash flows with low duration (term structure risk exposure). Many, such as mortgage-backed floaters, offer a higher yield than a comparable short-term security while maintaining high quality. Finally,...

Research Paper

Do companies with activities concentrated in one industry outperform their diversified brethren?

Research Paper

While Barra's multiple factor approach has gained widespread acceptance among within-country managers, this approach can only explain a part of the puzzle when it comes to international managers and their multiple country and multiple currency portfolios. Barra has developed products to perform a multiple factor performance attribution on a multiple country, multiple currency portfolio. Multiple factor performance analysis of international portfolios can analyze the active performance of...

Research Paper

Performance analysis focuses on the central goal of investment management: achieving superior                                         performance. A rigorous multi-factor approach to bond analysis can identify sources of fixed-income return,  estimate their statistical significance, and...