18-MultiFactorModels Page 535 Wednesday, February 4, 2004 1:10 PM
Multifactor Models and Common Trends for Common Stocks 535EXHIBIT 18.1 Barra E3 Model Risk DefinitionsDescriptors in Risk Index Risk Index
Beta times sigma Volatility
Daily standard deviation
High-low price
Log of stock price
Cumulative range
Volume beta
Serial dependence
Option-implied standard deviation
Relative strength Momentum
Historical alpha
Log of market capitalization Size
Cube of log of market capitalization Size nonlinearity
Share turnover rate (annual) Trading activity
Share turnover rate (quarterly)
Share turnover rate (monthly)
Share turnover rate (five years)
Indicator for forward split
Volume to variance
Payout ratio over five years Growth
Variability in capital structure
Growth rate in total assets
Earnings growth rate over the last five years
Analyst-predicted earnings growth
Recent earnings change
Analyst-predicted earnings-to-price Earnings yield
Trailing annual earnings-to-price
Historical earnings-to-price
Book-to-price ratio Value
Variability in earnings Earnings variability
Variability in cash flows
Extraordinary items in earnings
Standard deviation of analyst-predicted earnings-to-price
Market leverage Leverage
Book leverage
Debt to total assets
Senior debt rating
Exposure to foreign currencies Currency sensitivity
Predicted dividend yield Dividend yield
Indicator for firms outside US-E3 estimation universe Nonestimation
Universe indicator
Source: Adapted from Table 8-1 in Barra, Risk Model Handbook United States
Equity: Version 3 (Berkeley, CA: Barra, 1998), pp. 71–73. Adapted with permis-
sion.