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XRD EQUITY RISK MODELS
HYBRID METHODOLOGY

The Northfield XRD Equity Risk Models can be used to analyze the risk of single country, regional or global portfolios. They give the sensitivity of each security to its currency, market and industry as well as to nine style factors. They can also be used to estimate the sensitivity of any portfolio and its benchmark to a wide range of macro-economic variables. The XRD models are updated weekly using four-week return observations. This means that the observations overlap from one estimation to the next which helps smooth out statistical noise in the estimation of factor exposures. The use of four-week returns rather than monthly returns may also reduce the influence of heavy trading volumes which typically result from the common industry practice of rebalancing portfolios monthly.

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