Identifying Sources of Correlation in Global Equity Portfolios
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چکیده
One challenge for global equity managers is keeping track of correlations (or covariances) between the sources of risk in their portfolios. For instance, in the Barra Global Equity Model (GEM2) there are 153 factors, including country, currency, style, and industry factors that we have identified as being important. This leads to 11,628 unique correlations/covariances of which to keep track between factors. There are different ways that managers can distill this information, which is the focus of this Research Bulletin.
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