Stoxx announce smart beta Euro Stoxx 50 indices

Jul 8th, 2015 | By | Category: ETF and Index News

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Stoxx, a leading provider of European indices, has announced the launch of the EURO iSTOXX 50 Style Weighted and the EURO iSTOXX 50 Style Weighted Decrement Indices which appear suitable as the basis for index-linked products such as ETFs and structured products.

Stoxx announce smart beta EURO STOXX 50 indices

Stoxx have launched two smart beta indices based on the Euro Stoxx 50.

The indices include all components of Europe’s leading blue-chip index, the Euro Stoxx 50, but with an alternative weighting scheme based on fundamental characteristics as well as market capitalisation.

Fundamental characteristics are considered in order to gain exposure to three factors – value, quality and size – which have historically provided enhanced returns versus traditional market capitalisation-weighted indices. This is achieved by favouring cheaper, smaller companies and avoiding those of low-quality.

Hartmut Graf, chief executive officer of Stoxx, commented: “Through this unique concept, we offer market participants a smart beta index based on the Euro Stoxx 50 that takes the themes of value, quality and size into consideration.” He added: “While the Euro Stoxx 50 weights components based on free-float market cap, the EURO iSTOXX 50 Style Weighted has an innovative weighting scheme that reflects more than just the size of a company.”

The EURO iSTOXX 50 Style Weighted Decrement Index is derived from the EURO iSTOXX 50 Style Weighted Index and replicates the return of an investment into the net return version with a constant markdown of 5.5% subtracted on an accrued basis.

The component weightings of the indices are calculated based on return-on-equity, price-to-book ratio and free-float market cap. The ten highest-ranked companies are given a 5% weight, the following ten a 2.5% weight, companies ranked from 21 to 30 get a weight of 1.5%, from 31 to 40 get a weight of 0.75% and from 41 to 50 get a weight of 0.25%.

The EURO iSTOXX 50 Style Weighted Index is available in euro for price, net and gross return versions. The EURO iSTOXX 50 Style Weighted Decrement Index is available in euro for the price return version.

 

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