Introducing Multiple Horizon Versions of the Canada Equity Model (CNE4) - Research Notes

Jan 2, 2010

This report introduces the new multiple horizon versions of the Barra Canada Equity Model (CNE4) - Canada Equity Model Short Term (CNE4S) and Canada Equity Model Long Term(CNE4L). Both versions use daily returns data while accounting for serial correlations in aggregating daily factor returns to longer horizons. The new multiple horizon models provide more responsive risk forecasts than the existing model,CNE4. In addition to using higher frequency returns the new multiple horizon models also benefit from improvements in estimation universe construction and in specific risk forecasts.