Since the collapse of the Internet bubble, many Japanese portfolio managers have observed a surprising contrast between trends in tracking error and market volatility: tracking errors have fallen dramatically for many portfolios, while the volatility of the TSE1 index has declined much more gradually.  The decrease in tracking error is related to a phenomenon occurring in markets around the globe.  The cross-sectional dispersion of asset returns within these markets is much smaller...

Since the Internet bubble burst, we have observed three significant changes in the US stock market: a decline in the time-series volatility of assets' returns, a decrease in their cross-sectional dispersion and an increase in the proportion of their variance due to common factors.

The Barra Integrated Model is a global-multi-asset class model that forecasts asset and portfolio level risk for global equities, bonds and currencies.  Using innovative methods to couple broad asset coverage with detailed local market models, BIM provides in-depth analyses for single-country and global portfolios across asset classes.  The Barra Integrated Model for equities is a major innovation that brings together more than 40 customized single market models in a unified global...

Since 2000, there has been an increase in the number of stocks with high predicted betas in the US.  Resulting from changes in the risk characteristics of a few industries, the phenomenon has implications for hedging strategies as well as portfolio diversification.

Citigroup Asset Management was one of the first firms to recognize the precision and flexibility the new Barra Integrated Model brings to the investment process.  This article examines how Citigroup Asset Management implemented the Barra Integrated Model in its investment process by group the more than 1,000 risk factors into a small set of relevant investment factors.

The Barra Integrated Model is a major breakthrough in modeling international risk and return for both equity and fixed income securities, BIM introduces a revolutionary bottom-up approach to global risk modeling by integrating the accuracy of market-specific models in one global framework.  This new methodology provides an unprecedented level of local depth and precision coupled with the breadth of a global model.