PRESS RELEASEMSCI Launches New Japan Equity Factor Models
This next generation of Barra models feature new factors including
sustainability, improved risk forecasting methodology designed to adapt tomarket regimes and an enhanced estimation universe for the Japan market
Tokyo – January 19, 2023 – MSCI Inc. (NYSE: MSCI), a leading provider of critical decision support
tools and services for the global investment community, today announces the launch of the next
generation of MSCI Japan Equity Factor Models.
Designed to help investors better understand the factors that drive portfolio risk and performance asmarket conditions change, the models feature three new factors:•••

Sustainability includes both an ESG factor and a Carbon Efficiency factor that measures acompany’s emissions relative to its size
Crowding uses multiple measures to assess how a stock is priced relative to its own history
Machine Learning leverages data science and natural language processing to evaluate therelationships between different variables that impact a stock’s returns

Building on MSCI’s five decades of factor research and developed in consultation with some of theworld’s largest investors, the latest models enable institutional investors to construct portfolios across
new and familiar factor dimensions; run comparisons to industry peers and benchmarks; and provide
enhanced transparency into portfolio characteristics through improved handling of IPOs, improved
coverage, and dynamic industry exposure analysis.
The two new models include the MSCI Japan Equity Factor Model that is designed for long-term
investors and MSCI Japan Equity Factor Trading Model for investors managing strategies with shorter
investment horizons.
The new features in the MSCI Japan Equity Factor Model include:•••••

An Adaptive Factor Covariance Matrix methodology to improve portfolio risk forecasts bymodulating the impact of extreme factor returns on factor correlation based on the market
regimeAddition of an ESG factor to enable understanding of portfolio exposure to ESG and its impact
on performance
Addition of a carbon efficiency factor to support net-zero investing and understanding how acompany’s carbon emissions impact equity portfolio risk and return
Addition of Machine Learning, Stock Crowding and Seasonality factors to capture new sourcesof short-term risk
An implied volatility adjustment to factor covariance matrix to improve risk forecast byincorporating forward-looking information contained in the Nikkei Stock Average Volatility Index(NKVI)PRESS RELEASE
The new model will be available through multiple distribution channels, including Snowflake’s Data
Cloud, select third-party partners and from MSCI directly via the proprietary Barra Portfolio Managerand BarraOne® platforms.
Mark Carver, Head of Equity Portfolio Management and Equity Factors at MSCI, said: “Investors havetold us repeatedly that the new risk measures in these models, combined with the introduction ofsustainability factors, are crucial for an evolving investment landscape. We are excited to introduce
these innovative models to our clients in Japan and believe they will enable our clients to better
understand the drivers of their portfolio risk and return, construct differentiated portfolios, andeffectively respond to changing market dynamics.”-Ends-

About MSCIMSCI is a leading provider of critical decision support tools and services for the global investment community.
With over 50 years of expertise in research, data and technology, we power better investment decisions byenabling clients to understand and analyze key drivers of risk and return and confidently build more effective
portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into andimprove transparency across the investment process. To learn more, please visit www.msci.com.

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events or performance and involve risks that may cause actual results or performance differ materially and you should not place undue reliance on them. Risks that could
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