Social Sharing
Extended Viewer
Brazil Equity Model (BRE2) Research Notes
Feb 1, 2005
Barra’s new equity risk model for Brazil, BRE2, adopts a new industry classification based on the Global Industry Classification Standard (GICS)--a scheme developed by Morgan Stanley Capital International (MSCI) and Standard and Poor's. It also adds new risk indices, in particular taking account of the changed monetary regime in Brazil over the last few years, following the end of the currency fix against the dollar. This report describes BRE2 and reviews its performance.
The outline of this paper is as follows. Section 1 defines the BRE2 estimation universe. The industry and risk index (style) factors are described in Section 2. In Section 3, the discussion turns to how factor returns are calculated from asset returns and factor exposures. Section 4 describes how forecasts for common factor and asset selection risk (specific risk) are constructed. Section 5 reviews model performance in a variety of tests, and compares BRE2 risk forecasts with those of BRE1.
Download