This study explores the impact of the reclassification, from a risk-oriented perspective, on the STOXX® Global 1800 and STOXX® Europe 600 indices. We focus our analysis on the highest two tiers of the classification: Industry and Supersectors.
Style-factor risk premia have been well-documented (and harvested) in the equity world for decades but have proven far more elusive for bonds. The new Axioma Factor-based Fixed Income Model (FFIM) demonstrates that style factors not only do exist in credit, but that they also carry discernible risk premia, which, in turn, can be utilized for systematic, smart-beta investing.
The global equity market recovery continued in the third quarter, as benchmark risk slid. But not all components of risk participated in the decline, and volatility remained much higher than it was when the year started.
Understanding changes in risk estimates can be key, especially in times of crisis when volatilities spike and correlations point in the same direction, eliminating the diversification that was supposed to protect a portfolio.