STOXX unveils AI thematic equity index…driven by AI

Jan 25th, 2018 | By | Category: ETF and Index News

Frankfurt-headquartered index provider STOXX has unveiled the first thematic index to use artificial intelligence (AI)-based algorithms to select AI-involved companies.

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Matteo Andreetto, Chief Executive Officer, Stoxx.

The STOXX AI Global Artificial Intelligence Index contains around 200 stocks of companies that deploy resources into AI-related projects across the technology, telecommunications, finance and internet services sectors. Apple, Deutsche Telekom, Bank of America and Facebook are among the better-known companies in the index.

STOXX uses the STOXX Developed and Emerging Markets Total Market Index, which tracks around 7,000 stocks, as its starting universe. The companies are initially screened for a minimum liquidity of a three-month average daily trading value greater than 1 million euros.

STOXX partnered with Yewno, a Silicon Valley-based AI company, to further enhance the AI index stock selection methodology. The methodology seeks to incorporate company intellectual property (IP) patent filings related to AI projects into its stock-selection process.

It does this by screening companies based on AI IP contributions and AI IP exposures. The former compares each company’s total registered AI patents over the most recent three year period to the total number of AI patents registered globally, and the latter weighs the percentage of each company’s total patents relating to AI, again over the most recent three years. The index only includes companies which fall within the top three quartiles of each category.

The final selection of the index’s components is equally weighted, with the index composition reviewed quarterly.

In addition to the AI index, STOXX has also launched the STOXX Global Artificial Intelligence Index, which includes companies with more than 50% of revenues generated from AI-related projects.

Matteo Andreetto, CEO of STOXX, highlighted that “AI technologies present an unrivalled investment opportunity, yet investors need solutions to discern hype from a real opportunity. With our two new transparent, rules-based AI indices for AI-focused investors we offer them a choice: on the one hand, a classical, revenue-based approach; on the other hand, a progressive, AI IP-based approach, where an AI algorithm is used in the selection of companies. The latter index is a digital disruption in itself, as it is the first-ever AI index based on AI.”

The indices are suitable underlying reference indices for ETF product development and would prove appealing in ETF format to investors seeking equity exposure to companies that stand to benefit from the development of AI-related technologies.

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