This paper considers the changing value of the yen and its impact on the Japanese stock market during the last three decades, examining how this currency sensitivity has varied substantially across Japanese firms and during the observed period. In addition, we found the response to a rising or falling yen to be asymmetric. The dispersion of yen sensitivity is also seen to vary over time, which has implications for the passive-active investment debate under volatile exchange rate conditions....

This paper looks through the lens of the Barra Japan Equity model (JPE3) to analyze how the Japan equity market reacted to the recent earthquake on March 11. We also review the Japan equity market just after Kobe Earthquake in 1995, and see if there are similarities or differences in the behavior of Japanese stocks after these two events from a style and industry perspective. Given the sharp appreciation of the yen after the recent earthquake, we considered the differences in yen sensitivity...

From time to time, Value portfolios may experience higher risk (relative to other portfolios) or increased tracking error. To better understand these occurrences, this paper considers the volatility cycle of Value stocks globally. Corresponding to tracking error and total risk, the volatility of both active and absolute returns is considered. It was found that high volatility in the active returns of Value stocks was closely linked with the active performance cycle of these stocks, and tended...

Value investing is a common investment strategy, but like all other strategies it has suffered during certain periods, such as the tech rally in the late nineties. This paper examines the Value cycle globally, as well as specifically for Asia Pacific, and considers the impact of possible drivers, including those involving the overall stock market and macroeconomic factors. It was found that the Value cycle was closely linked with the level of risk aversion and, among macroeconomic variables,...

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 addition, we test a Momentum timing strategy based on hedging exposure to Momentum during market crashes.  The filter we apply, which is based on those months in which the...

This paper examines the holdings data of various active funds in China to analyze their risk and style characteristics over the last five years. We show that fund managers were quick to increase their equity exposure at the beginning of the bull market, and they started to cut their equity exposure before the 2007-2008 bear market arrived. In terms of style, we find that funds had tilts toward momentum and small caps, but away from value.

In 2009, emerging market bonds were among the top-performing assets in comparison to both global equity and fixed income. The recent, rapid rise in US Treasury yields and the concern over tightening monetary policies in certain countries led us to evaluate the relationship between global interest rate risks and emerging market bonds. We look at the risk characteristics of the market, along with the historical relationship of emerging market bonds with US Treasuries, other developed...

Japan’s domestic bonds constitute one of the major asset classes for Japanese pension plan sponsors. In this Research Bulletin, we use the Barra Integrated Model (BIM) to examine the evolution of this market and better understand the relationship between bonds and equities in Japan.

Catastrophic events can lead to change in established practices. This paper argues that organizations may get a competitive advantage by applying practices used in Business Continuity Planning (BCP) to the management of institutional portfolios. We propose a framework to prepare for extreme market events and mitigate their impact. This paper describes the required elements of BCP as applied to portfolios, reviews the tools and processes necessary to monitor the level of stress in financial...