Barra Risk Factor Analysis

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Definition: Barra Risk Factor Analysis

Barra Risk Factor Analysis works on a model that takes into consideration over 40 factors like earning growth, share turnover etc. Three main components namely industry risk, company specific risk and company’s investment risk are measured to arrive at a conclusion called Value-at-Risk (VaR).

The VaR number represents a percentile system in terms of volatility of the stock with respect to the other stocks that constitute the Index. This is generally done relative to the U.S markets.


For example:

If Apple (a listed company on US stock Exchange) is assigned a VaR number of 60, it shall mean that the stock of Apple is more price volatile than 60% of the stock market or the sector in which the company is.


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