DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL

SEPTEMBER 2016

Datasheet - Barra Global Total Market Equity

Trading Model

September 2016

Model Summary Model Advances

Asset Coverage: 75,300+ 1 • Style factors that reflect the latest research on Systematic Equity Strategies to
capture new sources of investment risk. Includes factors based on Investment
Style Factors: 22
Quality, Profitability, Earnings Quality, Earnings Yield, Momentum, Seasonality,
Industry Factors: 45 and Short Interest.
Country Factors: 88 • Point-in-time fundamental data.
Currency Factors: 88
• Enhanced industry and country exposures that capture the varying sensitivities of
firms to the country and industry factors resulting in more precise attribution of
stock returns.

• Alignment of the factor structure with a daily horizon for more accurate risk
forecast.
• Broad coverage of stocks, cross-listed securities, and Depository Receipts.

• Enhanced beta estimation, with Bayesian shrinkage to industry betas to increase

accuracy.

• Volatility Regime Adjustment methodology designed to calibrate factor

volatilities and specific risk forecasts to current market volatility levels.

• Optimization Bias Adjustment to reduce biases in risk forecasts for optimized

portfolios.

• Implied Volatility Adjustment leverages option-implied volatility to improve risk

forecasts and reflect market events in a timely fashion

• Robust specific risk model based on daily asset-level returns, incorporating

Volatility Regime Adjustment, Implied Volatility Adjustment and Bayesian
Adjustment techniques for greater forecasting accuracy.

• Daily updates and history back to Jan 1995.

1
As of November 2015

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Model Attributes Details

Application Usage Barra Aegis

Barra Portfolio Manager
Models Direct

Model Start Dates Barra PortfolioManager: 30 December 1994

Models Direct: 30 December 1994
Barra Aegis: 30 December 1994

Estimation Universe MSCI ACWI Investable Markets Index (ACWI IMI)

Note: The Barra Global Total Market Equity Trading Model (GEMTR) estimation universe of day t is generated after close of
day t. It is defined based on country of exposure, GICS codes, and MSCI ACWI Index of day t+1, as opposed to day t.
The estimation universe of day t is used in the regression of day t+1 to generate the factor returns for t+1, this allows the
constituents of MSCI ACWI Index of day t+1 to be used in calculating the factor returns for t+1.
This is consistent with how the MSCI ACWI Index return is calculated. This does not introduce any forward-looking bias in our
model estimation because any changes to the MSCI ACWI Index, country exposures, or GICS codes are generally announced
well ahead of time.

Regression Weighting Scheme Square root of USD market capitalization

Factor Covariance Matrix: Half-life Half-life for Volatility 42 days

Newey-West Volatility Lags 2 days

Half-life for Correlations 200 days

Newey-West Correlation Lags 1 day

Half-life for Volatility Regime 4 days

Adjustment

Specific Risk: Half-life Half-life for Specific Volatility 42 days

Newey-West Auto-Correlation Lags 0

Newey-West Auto-Correlation Half- 252 days

Life

Bayesian Shrinkage Parameter 0.1

Half-life for Volatility Regime 4 days

Adjustment

Linked Specific Risk available Yes

Industry Allocation Scheme Multiple-industry allocation (up to five industries)

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Model Attributes Details

Source of Industry Scheme Based on Global Industry Classification Standard (GICS®)

Model Base Currency USD

Style Factors Purpose Descriptors

Analyst Sentiment 2 Captures the response of stock prices to • Revision Ratio

changes in analyst earnings forecasts
• Change in Analyst-Predicted
Earnings-to-Price
• Change in Analyst-Predicted
Earnings Per Share

Beta2 Explains common variations in stock • Historical Beta

returns due to different stock sensitivities
to market or systematic risk that cannot
be explained by the World factor

Book-to-Price 3 Calculated as the last reported book value • Book-to-Price

of common equity divided by current
market capitalization

Dividend Yield3 Captures differences in stock returns • Dividend-to-Price

attributable to stock's trailing 12-month
• Analyst-Predicted Dividend-to-
and predicted dividend-to-price ratios
Price

Earnings Quality3 Explains stock return differences due to • Cash Earnings to Earnings
uncertainty around company operating
• Accruals-Balance Sheet Version
fundamentals (sales, earnings, cash flows)
and the accrual components of their • Accruals-Cashflow Statement
earnings Version

Earnings Variability3 Explains stock return differences due to • Standard Deviation of Analyst-
variability in earnings and cash flows Predicted Earnings-to-Price
using both historical measures and
• Variability in Sales
analysts’ forecasts
• Variability in Earnings
• Variability in Cash-Flows

2
Factors that are standardized globally.
3
Factors that are standardized locally.

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Style Factors Purpose Descriptors

Earnings Yield3 Describes stock return differences due to • Enterprise Multiple (EBIT to EV)
various ratios of the company's earnings
• Cash Earnings-to-Price
relative to its price
• Earnings-to-Price
• Analyst-Predicted Earnings-to-
Price

Growth3 Measures company growth prospects • Analyst-Predicted Earnings Long-

using sales growth and earnings growth Term Growth
over trailing five years and predicted
• Earnings per Share Growth Rate
earnings growth
• Sales per Share Growth Rate

Industry Momentum2 Explains the return differences of stocks • Industry Momentum

based on the both their performance over
the trailing six months and their GICS sub-
industry’s performance over the same
period.

Investment Quality3 Combination of asset, investment, net • Total Assets Growth Rate
issuance growth measures that captures
• Capital Expenditure Growth
common variation in stock returns of
companies experiencing rapid growth or • Issuance Growth
contraction of assets

Leverage3 Captures common variation in stock • Market Leverage

returns due to differences in the level of
• Book Leverage
company leverage
• Debt-to-Assets

Liquidity3 Captures common variations in stock • Monthly Share Turnover

returns due to the amount of relative
• Quarterly Share Turnover
trading and differences in the impact of
trading on stock returns • Annual Share Turnover
• Annualized Traded Value Ratio

Long-Term Reversal2 Explains common variation in returns • Long-Term Relative Strength

related to a long-term (five years ex.
• Long-Term Historical Alpha
recent thirteen months) stock price
behavior. It is orthogonalized with respect
to the Momentum factor

Mid Capitalization2 Captures non-linearities in the payoff to • Cube of Size Exposure

the Size factor across the market-cap
spectrum. This factor is based on a single
raw descriptor: the cube of the Size

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Style Factors Purpose Descriptors

exposure. However, because this raw

descriptor is highly collinear with the Size
factor, it is orthogonalized with respect to
the Size factor

Momentum2 Explains common variation in stock • Relative Strength 12-Month

returns based on their performance over
• Historical Alpha
the trailing 12 months

News Sentiment2 Captures investor sentiment using • Event Sentiment Score

unstructured text data produced by
• Composite Sentiment Score
traditional and social media.

Profitability3 Combination of profitability measures • Return on Assets

that characterizes efficiency of a firm's
• Gross Profitability
operations and total activities
• Gross Profit Margin
• Asset Turnover

Residual Volatility2 Captures relative volatility in stock • Historical Sigma

returns.
• Daily Standard Deviation
Consists three descriptors: (a) the
• Cumulative Range
volatility of daily excess returns, (b) the
volatility of daily residual returns, and (c)
the cumulative range of the stock over
the last 12 months. Since these
descriptors tend to be highly collinear
with the Beta factor, the Residual
Volatility factor is orthogonalized with
respect to the Beta, Size, and Liquidity
factors

Seasonality2 Captures differences in stock returns • Annual Seasonality

based on periodicity in their past
• Quarterly Seasonality
performance

Short Interest2 Explains return differences of stocks • Short Interest

based on the ratio of shares sold short to
the total number of shares available for
borrowing.

Short-Term Reversal2 Explains the return differences of stocks • Short-Term Reversal

based on how stocks under- or over-
performed the market over the recent
past as this is expected to reverse in the

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Style Factors Purpose Descriptors

near future.

Size3 Captures the return differences between • Log of Market Capitalization

large-cap stocks and small-cap stocks

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Industry Factors

1. Energy Equipment and Services 23. Food and Staples Retailing

2. Oil and Gas and Consumable Fuels 24. Food and Beverage and Tobacco
3. Integrated Oil and Gas 25. Household and Personal Products
4. Oil and Gas Exploration and Production 26. Health Care Services
5. Chemicals 27. Health Care Equipment and Suppliers
6. Fertilizers and Agricultural Chemicals 28. Biotechnology
7. Construction and Containers and Paper 29. Pharmaceuticals and Life Sciences
8. Aluminium and Diversified Metals 30. Banks
9. Precious Metals and Minerals 31. Thrifts and Mortgage Finance
10. Gold 32. Regional Banks
11. Steel 33. Diversified Financials
12. Building Products Construction Engineering 34. Capital Markets
13. Aerospace and Defense 35. Insurance
14. Machinery 36. Real Estate
15. Commercial and Professional Services 37. Real Estate Management
16. Transportation Non-Airline 38. Internet Software and Services
17. Airlines 39. IT Services and Software
18. Automobiles and Components 40. Communications Equipment
19. Consumer Durables and Apparel 41. Computers and Electronics
20. Consumer Services 42. Semiconductors
21. Media 43. Semiconductors Equipment
22. Retailing 44. Telecommunication Services
45. Utilities

Country Factors

1. Argentina Mkt 45. Macedonia Mkt

2. Australia Mkt 46. Malaysia Mkt
3. Austria Mkt 47. Malta Mkt
4. Bahrain Mkt 48. Mauritius Mkt
5. Bangladesh Mkt 49. Mexico Mkt
6. Belgium Mkt 50. Montenegro Mkt
7. Bosnia and Herzegovina Mkt 51. Morocco Mkt
8. Botswana Mkt 52. Namibia Mkt

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

Country Factors

9. Brazil Mkt 53. Netherlands Mkt

10. Bulgaria Mkt 54. New Zealand Mkt
11. Canada Mkt 55. Nigeria Mkt
12. Chile Mkt 56. Norway Mkt
13. China Domestic Mkt 57. Oman Mkt
14. China International Mkt 58. Pakistan Mkt
15. Colombia Mkt 59. Palestine Mkt
16. Croatia Mkt 60. Peru Mkt
17. Cyprus Mkt 61. Philippines Mkt
18. Czech Republic Mkt 62. Poland Mkt
19. Denmark Mkt 63. Portugal Mkt
20. Egypt Mkt 64. Qatar Mkt
21. Estonia Mkt 65. Romania Mkt
22. Finland Mkt 66. Russia Mkt
23. France Mkt 67. Saudi Arabia Mkt
24. Germany Mkt 68. Serbia Mkt
25. Ghana Mkt 69. Singapore Mkt
26. Greece Mkt 70. Slovakia Mkt
27. Hong Kong Mkt 71. Slovenia Mkt
28. Hungary Mkt 72. South Africa Mkt
29. Iceland Mkt 73. South Korea Mkt
30. India Mkt 74. Spain Mkt
31. Indonesia Mkt 75. Sri Lanka Mkt
32. Ireland Mkt 76. Sweden Mkt
33. Israel Mkt 77. Switzerland Mkt
34. Italy Mkt 78. Taiwan Mkt
35. Ivory Coast Mkt 79. Thailand Mkt
36. Jamaica Mkt 80. Trinidad and Tobago Mkt
37. Japan Mkt 81. Tunisia Mkt
38. Jordan Mkt 82. Turkey Mkt
39. Kazakhstan Mkt 83. Ukraine Mkt
40. Kenya Mkt 84. United Arab Emirates Mkt
41. Kuwait Mkt 85. United Kingdom Mkt
42. Latvia Mkt 86. United States Mkt
43. Lebanon Mkt 87. Vietnam Mkt
44. Lithuania Mkt 88. Zambia Mkt

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

World Factor

GEM World

Model Coverage

• Total 75,300+ assets. 4

 52,000+ stocks—400 more than GEM3

 Over 17,500 Cross-listed assets and 2200+ GDRs

 1900+ ADRs

Asset Coverage
2.61%
1.56%
2.94%

Stock

23.58% Cross-listed Assets

GDRs
ADRs
69.31%
Synthetic Assets

4
As of November 2015

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
SEPTEMBER 2016

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 DATASHEET - BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL
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