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Canada Equity Model (CNE4) Research Notes
Aug 2, 2003
This document describes the fourth version of Barra’s Canada Equity Model, CNE4, and highlights advantages of this model over its predecessor, CNE3. Section 1 focuses on the model’s estimation universe and its industry and risk index factors. Section 2 discusses the estimation of the factor model and refinements made. CNE4’s common-factor and specific risk forecasts are discussed in Section 3. Section 4 looks at the performance of the model and Section 5 compares the risk forecasts of CNE4 with those of CNE3.
Some of the enhancements introduced with CNE4 are:
- Industry structure based on the S&P/MSCI Global Industry Classification Standard (GICS), plus a separate Unit Trust industry
- Changes to risk indices
- Thin industry correction in the factor return estimation
- Improved specific risk model
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