What the 'Barra Risk Factor Analysis'

The Barra Risk Factor Analysis is 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.

RELATED TERMS
  1. Multi-Factor Model

    A financial model that employs multiple factors in its computations ...
  2. MSCI Inc

    An investment research firm that provides indices, portfolio ...
  3. Model Risk

    A type of risk that occurs when a financial model used to measure ...
  4. Market Risk

    The possibility for an investor to experience losses due to factors ...
  5. Country Risk

    A collection of risks associated with investing in a foreign ...
  6. Financial Risk

    The possibility that shareholders will lose money when they invest ...
Related Articles
  1. Investing

    Which Mutual Fund Style Index Is For You?

    The Russell Investments and MSCI Barra style classification systems can help you pick the right mutual fund - if you know how they work.
  2. Investing

    Is General Motors Stock Really a Buy? (GM)

    Learn about the challenges faced by General Motors Company and the changing dynamic of the auto industry as innovation draws competition from tech giants.
  3. Investing

    The Top 4 General Motors Shareholders (GM)

    Discover General Motors’ top four direct shareholders. Learn about how many shares they hold and obtain a brief description of their background.
  4. Financial Advisor

    When Multi-Factor ETFs Make Sense

    Multi-factor ETFs are a logical progression from single-factor smart beta ETFs. Here's when it makes sense to use them in a client's portfolio.
  5. Personal Finance

    Backtesting Value-at-Risk (VaR): The Basics

    Learn how to test your VaR model for accuracy.
  6. Investing

    How Investment Risk Is Quantified

    FInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk.
  7. Investing

    Understanding Market Risk

    Market risk is the chance that an investment’s value will decrease due to a factor that affects all investments across the market.
  8. Managing Wealth

    An Introduction To Factor Investing

    Factor investing delivers risk adjusted results that deliver the same or better investment returns as the overall market but with less risk.
  9. Investing

    Systematic Risk

    Systematic risk, also known as volatility, non-diversifiable risk or market risk, is the risk everyone assumes when investing in a market. Think of it as the overall, aggregate risk that comes ...
RELATED FAQS
  1. What are some common measures of risk used in risk management?

    Learn about common risk measures used in risk management and how to use common risk management techniques to assess the risk ... Read Answer >>
  2. What's the difference between EaR, Value at Risk (VaR), and EVE?

    Learn about earnings at risk, value at risk and economic value added, how these risk measures are used, and the difference ... Read Answer >>
  3. What is the difference between market risk and country risk?

    Learn about market risk and country risk, some examples of each and the main difference between these two types of risks. Read Answer >>
  4. What are the key differences between financial risk and business risk to a company?

    Understand the difference between a company's financial risk and its business risk, along with some of the factors that affect ... Read Answer >>
  5. What are the primary sources of market risk?

    Learn about market risk and the four primary sources of market risk including equity, interest rate, foreign exchange and ... Read Answer >>
  6. What is a "linear" exposure in Value at Risk (VaR) calculation?

    Learn how the value-at-risk (VaR) calculation is used for portfolios with linear risk as opposed to nonlinear risk, and understand ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center