We analyze components of long run returns of international equity markets using historical data spanning the 1975-2009 period. The analysis shows that after inflation, dividend income was the most important part of equity returns for the majority of markets. Growth in real book value had a low,...

The Canadian and US economies are highly integrated. The US is Canada's largest trading partner and the health and strength of the US economy has important ramifications for the Canadian economy and markets. In this Research Bulletin, we use the Barra Canada Equity Model (CNE4) to explore the...

The Momentum factor in the Barra Global Equity Model (GEM2) recently experienced its largest negative historical return in more than a decade. The Momentum factor has declined for 10 consecutive months, which is unprecedented in the 13-year GEM2 factor return history. In this Research Bulletin,...

The relationship between stocks and bonds has important implications for asset allocation and risk diversification. This Research Bulletin examines the recent history of this relationship in the G5 economies. It also uses the multi-asset class platform of the Barra Integrated Model (BIM) to...

When there is noise in a covariance matrix, portfolio optimization tends to produce portfolios for which the risk forecasts are underestimates of the true risk. In this paper, we take a closer look at the connection between estimation error and the underestimation of the risk of optimized...

This Research Insight examines the question of whether currency hedging is a 'free lunch' of risk reduction and zero expected returns. Using a long history of hedged and unhedged MSCI indices, we find that hedging does not always reduce risk, nor are mean returns zero. Contrary to some prior...

This latest research bulletin in the GEM2 Series considers the degree of global exposure of different industries at the global level, and constructs a measure that is based on the GEM2 Model. It then examines how differences in global exposure across industries are related to style, return and...

The misalignment of alpha and risk factors may result in inadvertent and unwanted bets that may hamper performance. Lee and Stefek (2008) show that better aligning risk factors with alpha factors may improve the information ratio of optimized portfolios. They propose four ways of modifying a...

The China A share market has experienced tremendous volatility over the last three years. This research bulletin examines this volatility through the lens of the Barra China Equity Model (CHE2), especially in light of the turbulence of global markets in recent months

In this Research Bulletin, we review the recent risk environment in Gulf Cooperation Council (GCC) countries using the new and enhanced Barra Global Equity Model (GEM2). The main finding of this paper is that despite the segmented nature of the GCC markets, correlations of GCC countries' stocks...