BARRA GLOBAL TOTAL MARKET EQUITY TRADING MODEL

EMPIRICAL NOTES
SEPTEMBER 2016

Appendix F: Descriptor Descriptions

This appendix defines the descriptors in the style factors. The descriptors are listed under the style factors to which
they belong. The factors are listed alphabetically.
Style: Analyst Sentiment
Descriptors: RR Revision Ratio
Computed as the weighted average value of the ratio of the
number of earnings up-revisions minus the number of earnings
down-revisions to the total number of earnings forecasts used to
compute the earnings consensus:

𝑢𝑢𝑢𝑢 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑
𝑁𝑁 − 𝑁𝑁𝑡𝑡−𝑙𝑙×25
𝑅𝑅𝑅𝑅(𝑡𝑡) = � 𝑤𝑤𝑙𝑙 𝑡𝑡−𝑙𝑙×25𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 � � 𝑤𝑤𝑙𝑙
𝑁𝑁𝑡𝑡−𝑙𝑙×25
𝑙𝑙=0,1,2 𝑙𝑙=0,1,2

where 𝑤𝑤0,1,2 = {3, 2, 1}

ETOPF_C Change in Analyst-Predicted Earnings-to-Price

Computed as the weighted average of monthly relative changes
of forecast Earnings-to-Price ratio:

𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑆𝑆𝐶𝐶(𝑡𝑡)
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−𝑙𝑙×63 − 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−(𝑙𝑙+1)×63
= � 𝑤𝑤𝑙𝑙 � � 𝑤𝑤𝑙𝑙
(|𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−𝑙𝑙×63 | + �𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−(𝑙𝑙+1)×63 �)/2
𝑙𝑙=0,1,2,3 𝑙𝑙=0,1,2,3

where 𝑤𝑤0,1,2,3 = {9, 7, 5, 3}

EPSF_C Change in Analyst-Predicted Earnings Per Share

Computed as the weighted average of monthly relative changes
of forecast Earnings Per Share:

𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸_𝐶𝐶(𝑡𝑡)
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−𝑙𝑙×63 − 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−(𝑙𝑙+1)×63
= � 𝑤𝑤𝑙𝑙 � � 𝑤𝑤𝑙𝑙
(|𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−𝑙𝑙×63 | + �𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡−(𝑙𝑙+1)×63 �)/2
𝑙𝑙=0,1,2,3 𝑙𝑙=0,1,2,3

where 𝑤𝑤0,1,2,3 = {9, 7, 5, 3}

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Style: Beta
Descriptors: HBETA Historical Beta
Computed as the slope coefficient from a time-series regression
of stock excess returns against the cap-weighted excess returns
of the estimation universe over a trailing window of 504 trading
days, with a 252-day half-life.
The returns are aggregated over four-day windows to reduce the
effect of non-synchronicity and auto-correlation.

Style: Book-to-Price
Descriptors: BTOP Book-to-Price
Computed by dividing the last reported book value of common
equity by the current market capitalization.

Style: Dividend Yield

Descriptors: DTOP Dividend-to-Price
Computed by dividing the trailing 12-month dividend per share
by the price at the last month end.
DTOPF Analyst-Predicted Dividend-to-Price
Computed by dividing the 12-month forward-looking dividend
per share (DPS) by the current price.

Style: Earnings Quality

Descriptors: ABS Accruals - Balance Sheet Version
The balance-sheet-based accruals, 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴_𝐵𝐵𝐵𝐵, is first computed
from changes in balance sheet items from the last two fiscal
years and depreciation for the last fiscal year. The descriptor is
then computed as the negative 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴_𝐵𝐵𝐵𝐵 normalized by total
assets:
𝐴𝐴𝐴𝐴𝐴𝐴 = −𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴_𝐵𝐵𝐵𝐵/𝑇𝑇𝑇𝑇
Thus it goes long companies with low accruals.

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ACF Accruals – Cash Flow Version

The cash-flow-statement-based operating accruals, 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴_𝐶𝐶𝐶𝐶, is
first computed from cash flow items and depreciation for the
last fiscal year. The descriptor is then computed as the negative
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴_𝐶𝐶𝐶𝐶 normalized by total assets:
𝐴𝐴𝐴𝐴𝐴𝐴 = −𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴_𝐶𝐶𝐹𝐹/𝑇𝑇𝑇𝑇
Thus it goes long companies with low accruals.
CETOE Cash Earnings to Earnings
The difference between cash-earnings-to-price and earnings-to-
price.

Style: Earnings Variability

Descriptors: VSAL Variability in Sales
Computed by dividing the standard deviation of the annual sales
of the last five fiscal years by the average annual sales.
VERN Variability in Earnings
Computed by dividing the standard deviation of the annual
earnings of the last five fiscal years by the average annual
earnings.
VFLO Variability in Cash-flows
Computed by dividing the standard deviation of the annual cash
flows of the last five fiscal years by the average annual cash flow.
ETOPF_STD Standard Deviation of Analyst Predicted Earnings-to-Price
Computed by dividing the standard deviation of the 12-month
forward-looking earnings per share estimates by the current
price.

Style: Earnings Yield

Descriptors: CETOP Cash-Earnings-to-Price
Computed by dividing the trailing 12-month cash earnings by the
current market capitalization.
ETOP Earnings-to-Price
Computed by dividing the trailing 12-month earnings by the
current market capitalization.

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EBITTOEV Enterprise Multiple (EBIT to EV)

Computed by dividing the earnings before interest and taxes
(EBIT) of the previous fiscal year by the current enterprise value
(EV).
ETOPF Analyst-Predicted Earnings-to-Price
Computed by dividing the 12-month forward-looking earnings by
the current market capitalization.

Style: Growth
Descriptors: EGRLF Analyst-Predicted Long-term Earnings Growth
Long-term (3-5 years) earnings growth forecasted by analysts.
EGRO Earnings per Share Growth Rate
Computed by dividing the slope coefficient from the regression
of the annual earnings per share from the last five fiscal years
against time, by the average annual earnings per share.
SGRO Sales per Share Growth Rate
Computed by dividing the slope coefficient from the regression
of the annual sales per share from the last five fiscal years
against time, by the average annual sales per share.

Style: Industry Momentum

Descriptors: INDMOM Industry Momentum
The 126-day (i.e., six-month) Relative Strength for each stock is
first computed as :

125

𝑅𝑅𝑅𝑅(𝑡𝑡) = � 𝑤𝑤𝜏𝜏 �ln(1 + 𝑟𝑟𝑡𝑡−𝜏𝜏 ) − ln(1 + 𝑟𝑟𝑚𝑚,𝑡𝑡−𝜏𝜏 )�

𝜏𝜏=0

where 𝑟𝑟𝑡𝑡 is the stock excess return, and 𝑟𝑟𝑚𝑚,𝑡𝑡 is the capitalization-
weighted market excess return on day t, and 𝑤𝑤𝜏𝜏 is the
exponential weight with a 20-day half-life.
The non-lagged Industry Momentum for each stock is then
computed as the square-root-capitalization-weighted average of
the 126-day Relative Strength of all its peer stocks from the
same GICS® sub‐industry. The final INDMOM descriptor is then
computed as the equal-weighted average of the values from a

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three-day window lagged by three days.

Style: Investment Quality

Descriptors AGRO Total Assets Growth Rate
Computed by first dividing the slope coefficient from the
regression of the total assets from the last five fiscal years
against time by the average total assets, and then multiplying by
-1 to reverse the sign.
IGRO Issuance Growth
Computed by first dividing the slope coefficient from the
regression of the number of shares outstanding from the last
five fiscal years against time by the average number of shares
outstanding, and then multiplying by -1 to reverse the sign.
CXGRO Capital Expenditure Growth
Computed by first dividing the slope coefficient from the
regression of the capital expenditures from the last five fiscal
years against time by the average capital expenditures, and then
multiplying by -1 to reverse the sign.

Style: Leverage
Descriptors: MLEV Market Leverage
Computed as,
𝑀𝑀𝑀𝑀 + 𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿
𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 =
𝑀𝑀𝑀𝑀
where 𝑀𝑀𝑀𝑀 is the market value of common equity on the last
trading day, and 𝑃𝑃𝑃𝑃 and 𝐿𝐿𝐿𝐿 are the preferred equity and long-
term debt, respectively, from the last fiscal year.
BLEV Book Leverage
Computed as,
𝐵𝐵𝐵𝐵 + 𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿
𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 =
𝐵𝐵𝐵𝐵
where 𝐵𝐵𝐵𝐵, 𝑃𝑃𝑃𝑃, and 𝐿𝐿𝐿𝐿 are the book value of common equity,
preferred equity, and long-term debt, respectively, from the last
fiscal year.

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DTOA Debt-to-Assets 12
Computed as,
𝑇𝑇𝑇𝑇
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 =
𝑇𝑇𝑇𝑇
where 𝑇𝑇𝑇𝑇 and 𝑇𝑇𝑇𝑇 are the total liabilities and total assets,
respectively, from the last fiscal year.

Style: Liquidity
Descriptors: STOM Monthly Share Turnover
Computed as the log of the percentage of shares traded in the
most recent month.
STOQ Quarterly Share Turnover
Computed as the log of the percentage of shares traded monthly
over the last three months.
STOA Annual Share Turnover
Computed as the log of the percentage of shares traded monthly
over the last 12 months.
ATVR Annualized Traded Value Ratio
Computed as the exponentially-weighted sum of the percentage
of shares traded daily over a trailing 252-day window with a 63-
day half-life.

Style: Long-Term Reversal

Descriptors: LTRSTR Long-Term Relative Strength
The non-lagged Long-Term Relative Strength is first computed
exponentially-weighted sum of the log excess returns of the
stock relative to the market over a trailing 1040-day window,
with a 260-day half-life. The final LTRSTR descriptor is then
computed by first taking the equal-weighted average of the non-
lagged values over an 11-day window lagged by 273 days, and
then multiplying it by -1 to reverse the sign.

12 This definition was implemented in the ongoing updates as of May 28, 2018. Prior to this, DTOA was defined as: DTOA = (Long-Term Debt + Current

Liabilities) / Total Assets). Historical changes will be reflected in any future model history refresh.

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LTHALPHA Long-Term Historical Alpha

The non-lagged Long-Term Historical Alpha is first computed as
the intercept term from a CAPM regression similar to the one
used to compute the HBETA descriptor, except with a 1040-day
window and a 260-day half-life. The final LTHALPHA descriptor is
then computed as the equal-weighted average of non-lagged
values over an 11-day window lagged by 273 trading days,
multiplied by -1 to reverse the sign.

Style: Mid Capitalization

Descriptors: MIDCAP Cube of Size Exposure
The Size factor exposure is first cubed, and then orthogonalized
to Size on a regression-weighted basis, and finally winsorized
and standardized.

Style: Momentum
Descriptors: RSTR Relative Strength
The non-lagged Relative Strength is first computed as the
exponentially-weighted sum of the log excess returns of the
stock relative to the market over a trailing 252-day window, with
a 126-day half-life. The final RSTR descriptor is then computed as
the equal-weighted average of the RS over an 11-day window
lagged by 11 days.
HALPHA Historical Alpha
The non-lagged Historical Alpha is computed as the intercept
term from the same time-series regression that is used to
compute HBETA. The final HALPHA descriptor is then computed
as the equal-weighted average of the non-lagged values over an
11-day window lagged by 11 days.

Style: News Sentiment

Descriptors: CSCORE Composite Sentiment Score
First, the net count of positive news items, 𝑃𝑃(𝑡𝑡), for each stock is
computed as the number of positive news items (i.e., news
items with Composite Sentiment Score above 50), 𝑁𝑁𝑡𝑡+ , less the
number of negative news items (i.e., news items with Composite
Sentiment Score below 50), 𝑁𝑁𝑡𝑡− , from the full set of daily news
items for the stock:

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𝑃𝑃(𝑡𝑡) = 𝑁𝑁𝑡𝑡+ − 𝑁𝑁𝑡𝑡−

Then, two moving averages of 𝑃𝑃(𝑡𝑡) are computed from trailing
windows of 42 and 126 days, repectively, with the same 126-day
half-life:
𝑇𝑇−1

𝑀𝑀𝑇𝑇 (𝑡𝑡) = � 𝑤𝑤𝜏𝜏 𝑃𝑃(𝑡𝑡 − 𝜏𝜏)

𝜏𝜏=0
where, 𝑇𝑇 = 42 or 126, and 𝑤𝑤𝜏𝜏 is the exponential time weight.
A moving standard deviation of 𝑃𝑃(𝑡𝑡) is also computed from the
trailing 126 days with the 126-day half-life:

125

𝑆𝑆126 (𝑡𝑡) = �� 𝑤𝑤𝜏𝜏 (𝑃𝑃(𝑡𝑡 − 𝜏𝜏) − 𝑀𝑀(𝑡𝑡))2

𝜏𝜏=0

The final CSCORE descriptor is then computed as the diviation of

the faster moving average from the slower one, normalized by
the moving standard deviation:
𝑀𝑀42 (𝑡𝑡) − 𝑀𝑀126 (𝑡𝑡)
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶(𝑡𝑡) =
𝑆𝑆126 (𝑡𝑡)

ESCORE Event Sentiment Score

Computed similarly to CSCORE, except from the Event Sentiment
Score data source.

Style: Profitability
Descriptors: ATO Asset Turnover
Computed as,
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
𝐴𝐴𝐴𝐴𝐴𝐴 =
𝑇𝑇𝑇𝑇
where 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 is the trailing 12-month sales, and 𝑇𝑇𝑇𝑇 is the most
recently reported total assets.
GP Gross Profitability
Computed as,
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 − 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
𝐺𝐺𝐺𝐺 =
𝑇𝑇𝑇𝑇
where 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆, 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶, and 𝑇𝑇𝑇𝑇 are the sales, cost of goods sold,
and total assets, respectively, from the last fiscal year.

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GPM Gross Profit Margin

Computed as,
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 − 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶
𝐺𝐺𝐺𝐺𝐺𝐺 =
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆
where 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 and 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 are the sales and cost of goods sold,
respectively, from the last fiscal year.
ROA Return on Assets
Computed as,
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
𝑅𝑅𝑅𝑅𝑅𝑅 =
𝑇𝑇𝑇𝑇
where, 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 is the trailing 12-month earnings, and 𝑇𝑇𝑇𝑇 is
the most recently reported total assets.

Style: Residual Volatility

Descriptors: HSIGMA Historical Sigma
Computed as the volatility of the residual returns from the same
time-series regression that is used to compute HBETA.
DASTD Daily Standard Deviation
Computed as the volatility of daily excess returns over the past
252 trading days with a 42-day half-life.
CMRA Cumulative Range
Computed as the gap between the highest and lowest points of
the cumulative log excess return in the past 12 months.

Style: Seasonality
Descriptors: SEASONA Annual Seasonality
Computed as the average daily return over the month following
the same calendar day in the last five years, divided by the
standard deviation of this sample of daily returns.
SEASONQ Quarterly Seasonality
Computed as the average daily return over the ten days
following the same calendar day in the last ten quarters,
dividend by the standard deviation of this sample of daily
returns.

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Style: Size
Descriptors: LNCAP Log of Market Capitalization
Computed as the natural logarithm of the market capitalization
of the firm.

Style: Short Interest

Descriptors: SHORTINT Short Interest
The ratio of shares sold short to the total number of shares
available for borrowing.

Style: Short-Term Reversal

Descriptors: STRSTR Short-Term Reversal
This descriptor is computed similarly to the RSTR descriptor of
the Momentum factor, except with a 63-day window and a 10-
day half-life, and is multiplied with -1 to reverse sign, and is then
averaged over a three-day window lagged by one day.

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