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The Barra Integrated Model

The Barra Integrated Model is a multi-asset class model for forecasting the asset and portfolio level risk of global equities, bonds and currencies. The model uses innovative methods to couple broad asset coverage with the detailed analysis of Barra's models that focus on particular markets. This makes it suitable for a wide range of investment purposes, from conducting an in-depth analysis of a single-country portfolio to understanding the risk profile of a broad set of international investments.

The model is built upon a foundation of factor models of local equity and bond markets. By modeling each market individually, we provide the most accurate forecasts of local market risk and also enable investors to see their exposures to the style and industry factors of each market.

We then use structural models containing global factors to link local factors across markets. The structural models decompose local factor returns into a part due to global factors and a part that is purely local. The global factors are used to estimate the correlation structure across asset classes.

Our use of structural models provides a new framework for global analysis. The result is a groundbreaking global model that offers both broad coverage and in-depth analysis.