Barra Risk Factor Analysis


DEFINITION of 'Barra Risk Factor Analysis'

A multi-factor model created by Barra Inc., which is used to measure the overall risk associated with a security relative to the market. Barra Risk Factor Analysis incorporates over 40 data metrics including: earnings growth, share turnover and senior debt rating. The model then measures risk factors associated with three main components: industry risk, risk from exposure to different investment themes and company-specific risk.

BREAKING DOWN 'Barra Risk Factor Analysis'

The Barra Risk Factor Analysis model measures a security's relative risk with a single value-at-risk (VaR) number. This number represents a percentile rank between 0 and 100, with 0 being the least volatile and 100 being the most volatile, relative to the U.S. market. For instance, a security with a value-at-risk number of 80 is calculated to have a greater level of price volatility than 80% of securities in the market and its specific sector.

  1. Metrics

    A wide variety of tools that managers and executives can use ...
  2. Security

    A financial instrument that represents an ownership position ...
  3. Comparables

    A valuation technique in which a recently sold asset is used ...
  4. Multiple

    A term that measures some aspect of a company's financial well-being, ...
  5. Stock

    A type of security that signifies ownership in a corporation ...
  6. Value At Risk - VaR

    A statistical technique used to measure and quantify the level ...
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