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The Volatility Factor: How do Exposures Change over Time?

This article examines how stock exposures to the Volatility factor, as defined in the Barra Global Equity Model (GEM2), change over time. We show how the exposure to the Volatility factor of some sectors and regions have evolved over time. Exposures to the Volatility factor can change significantly, reflecting market events that affect the relative riskiness of a country, region or sector.