A few large asset owners have expressed a preference for an expanded opportunity set that goes beyond the traditional equity universe comprised of large, mid, and small capitalization companies. These investors have typically focused on the domestic equity market. In order to address these...

At the November 3, 2010 meeting, the US Federal Reserve divulged its widely anticipated second round of Quantitative Easing (QE2 plan), formally announcing it would purchase an additional USD600bln in US Treasuries by the end of the second quarter 2011. In the aftermath of the announcement the...

Some investors argue that the risk of a market capitalization weighted benchmark is not limited to volatility, but also includes other dimensions, such as high concentration, and excess volatility due to pricing inefficiency. Removing the influence of prices from index weighting schemes could...

This year, the government of China approved the launch of index futures, margin trading, and short selling of stocks. The trial program for short selling rolled out with 90 stocks in the program as of March 31, 2010. In this paper, we explore the effect of the relaxation of short sale...

With 153 factors, the Barra Global Equity Model (GEM2) provides a rich and granular view of the global equity space and the main sources of return and risk. However, having 153 factors leads to 11,628 unique correlations/covariances between factors, which makes it a challenge for managers to...

This paper presents a framework for conducting effective stress tests and incorporating insights from stress tests in portfolio construction. We examine how to determine the scope of the stress test, how to construct severe, but plausible scenarios, how to transmit the shock to the portfolio and...

This bulletin is part of a series highlighting the ways in which factor models can help managers with fundamental processes. Most PMs are familiar with sector trends. Sectors go through periods of under- and over performance, and some are more risky than others. But sectors also exhibit...

Stock picking often is carried out with stock screens that reduce the set of eligible stocks. Such screens usually are assessed through the level and volatility of the resultant returns, mostly with associated statistics such as information ratio or Sharpe ratio. This evaluation, however, often...

The analysis of a possible positive relationship between economic growth and stock market returns is interesting both theoretically and practically. Investors often wonder if they should assign higher weight to countries with higher economic performance, hoping that economic growth will...

This Research Bulletin considers Momentum in Asia Pacific stock markets. We find that Momentum has performed better in some markets than others, and its effectiveness varies across time. We use the new Barra Asia Pacific Equity Model to capture these variations across markets and over time. In...