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MSCI completes Barra US Total Market Equity Model suite


MSCI Inc has completed the roll-out of its range of next-generation equity risk models, with the release of the Barra US Total Market Medium-Term Equity Model. 

The latest model joins MSCI’s new Barra US Total Market Equity Model Suite, which was built to include factor structures that are aligned with multiple investment horizons, marking a new era for advancing the standard for measuring and managing risk.
Peter Zangari, Managing Director and Head of Analytics for MSCI, says: “With factor investing increasingly recognised as a demonstrable vehicle for delivering sustained alpha at low costs, the Barra US Total Market Equity Model Suite allows investors to evaluate factor performance over long-term, medium-term and daily investment horizons.”
This new suite of models includes Systematic Equity Strategies, which allow investment managers to better understand and monitor the sources of risk and return in equity portfolios while capturing volatility and correlation among stocks. Using models enhanced with Systematic Equity Strategies also enables institutional investors to better manage their exposures to crowded strategies and improves model performance across multiple use cases such as portfolio construction, risk monitoring, trading and hedging market risk.
The Barra US Total Market Equity Model Suite targets three investment horizons: Long-Term, Medium-Term, and Trading. The Long-Term model incorporates the most stable set of style factors reflecting long-term strategies that aim to keep portfolio turnover and transaction costs at low levels while the Medium-Term and Trading models add additional style factors to improve model performance across shorter investment horizons.
This next generation model suite includes:

• New Barra factors with new sources of data content. Some of the new factors include Management Quality, Profitability, Earnings Quality, Prospect, Sentiment, and Regional Momentum.

• Significant enhancements to traditional Barra factors such as Liquidity, Value, Residual Volatility, Dividend Yield, and Earnings Yield.

• Latest estimation methodologies such as Implied Volatility Adjustment and Volatility Regime Adjustment for better prediction of volatility in rapidly changing market environments, Optimisation Bias Adjustment for improved portfolio optimisation, and Robust Specific Risk Model incorporating Bayesian Adjustments for greater forecast accuracy.

• Historical point-in-time fundamental data with daily updates.  

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