Global Cross-Sectional Volatility Analysis
Jose Menchero, MSCI Barra, Global Cross-Sectional Volatility Analysis, 2010
Summary
CSV represents the opportunity for active management
CSV can be attributed to individual factors
Styles, countries, and industries dominate over different periods
The relative strength of countries versus industries can be measured by the Diversification Potential (DP) or MAD
Countries dominate industries in EM, vice versa in Dev. Europe
Country factors persist in small-cap regime; industries weaken
Recent decline of DP due to increased volatility of World factor, not decline in volatility of country or industry factors