Gold Mining Equity Analysis with the Custom Risk Module

Gold mining equities occupy a peculiar corner of the investment universe. On the surface, they are equities—listed on major exchanges, covered by analysts, and subject to the same governance and reporting standards as any industrial company.

In practice, however, their return dynamics are dominated by a single commodity price, and their cross-sectional dispersion is driven by operational and financial characteristics that standard equity risk models fail to capture.

A conventional multi-factor equity model treats gold miners as a single sector exposure, so a dominant driver of their returns—their sensitivity to the gold price—appears only implicitly through the sector loading. The fundamental differences between a low-cost senior producer and a heavily leveraged junior are largely swept into the residual. An off-the-shelf model therefore will not suffice for gold miners.

This is where the Custom Risk Module (CRM) in the FactSet Programmatic Environment (FPE), combined with the insight available in the FactSet deep-sector data, shines the most.

The goal of our new research note, Gold Mining Equity Analysis with the Custom Risk Model, is to walk you through the process of building a bespoke risk model utilizing CRM in FPE, including:

• Data gathering

• Exposure outlier treatment and standardization

• Setup of the Custom Risk Module and how to use it as a custom risk-model builder

• Results and model analysis

Read the full analysis: Gold Mining Equity Analysis with the Custom Risk Model. 

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