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

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