Asset owners and asset managers are increasingly interested in so-called “smart beta” indexes, a category that includes factor and alternatively weighted indexes. In a series of four FTSE Russell Insights, we explore the concept of factors in depth. We examine the differences between factor indexes and other types of smart beta indexes, illustrate how factor exposure is embedded in an index and suggest how factors can be combined most effectively.
The small cap premium has long been a staple of equity investing, but recently some practitioners have called its very existence into question.
New research suggests that the mix of quality, volatility and size factors is important. This is confirmed with an analysis of the Russell 2000® Defensive Index, which combines these three factors and exhibits a strong small cap premium.
The performance of the Russell 2000® Defensive Index points the way to exploring further multifactor combinations in the small cap asset class.
On May 26, 2015, FTSE Russell introduced the FTSE Global China A Inclusion Indexes as a transitional tool in preparation for the potential inclusion of China A-shares in its widely followed global benchmarks. These indexes were designed in response to the gradual liberalization of the Chinese capital markets, as evidenced by the growth of the QFII and RQFII schemes and the introduction of the Shanghai-Hong Kong Stock Connect program.
Traditional style indexes – such as growth and value, large and small cap – are designed to represent broad market segments based on investment styles and sets of characteristics that are focused on by professional investment managers, making them excellent benchmarks for evaluating the skill of active managers.
In 1995, Nomura Research Institute and Frank Russell Company’s index group partnered to create the Russell/Nomura Japan Equity Indexes (RNJEI) as benchmarks for the Japanese equity market. The year 2015 marks the 20th anniversary of the creation of the RNJEI series and provides a good opportunity to evaluate the effectiveness of the indexes.
The RNJEI series was created to accomplish several objectives:1
An equity factor index is intended to offer controlled exposure to a factor or factors. But how does it achieve this goal in practice? There are a number of conceptual and design steps involved in the creation of an equity factor index and in this paper we explore these decisions.
Recent volatility in the value of the euro, Swiss franc and Japanese yen suggest that risk in global currency markets may be on the rise. The currency market is the world’s largest financial market and, with the ongoing globalization of portfolio exposures, is becoming an increasingly important component of investors’ returns. However, if investors share their currency exposures with those implicit in their equity, fixed income or other benchmarks, they may be setting their currency policy unconsciously, rather than consciously.
In finance and investment theory, factors are variables that drive equity returns. In recent decades there has been great interest in identifying factors that help explain equities’ behavior, and factor research has been actively pursued across other asset classes, such as fixed income and currencies.
The earth is flat . . . or so it was believed, until sometime after 500 B.C.1 Until then, explorers dared not venture too far, for fear of reaching the physical limits of the planet and . . . falling off. It’s easy to imagine how constrained the world must have seemed to those who held this view. Equity indexing, too, has had its own “flat earth” period, when the global opportunity set seemed to be limited to the largest stocks from a select number of large countries.
There are no changes to the FTSE SET Large Cap Index
Six additions to the FTSE SET Mid Cap Index
15 additions to the FTSE SET Shariah Index
FTSE Russell today announces that there are no changes to the FTSE SET Large Cap Index, following the June 2017 semi-annual review.
The index series is reviewed semi-annually in accordance with the index ground rules.
As a re...
Two massive storms wreaked havoc on people and property in two separate coastal regions of the southern US – Harvey in Texas and Irma in Florida. To what extent did the devastation negatively impact the stock market and particularly some specific sectors most vulnerable to severe storm damage?
After losing ground in July and August as reflected by a 0.5% negative return for the Russell 2000 Index, US small cap stocks have rebounded, rising 2.9% in September as of market close on September 20.
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