MSCI looks at how equity investors can find European stocks that offer some protection against the current volatility buffering markets.
Zoltán Nagy and Oleg Ruban examine how the Barra Europe Equity model (EUE3) can be used to help identify stocks that are less sensitive to the unfavorable movements in troubled countries.
Using the covariance matrix of the EUE3 model, the researchers calculate the predicted betas of European stocks with respect to a given country. After repeating this separately for the five most troubled countries (Ireland, Portugal, Spain, Italy, and Greece), Nagy and Ruban look for common characteristics of the lowest beta stocks.
The results show important regional, sector and style commonalities among these securities.
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