FTSE introduces new global factor indices

Aug 7th, 2014 | By | Category: ETF and Index News

FTSE, a leading provider of indices to the exchange-traded funds industry, has announced the launch of the FTSE Global Factor Index Series, a new suite of indices designed to represent the performance of specific factors.

FTSE introduces new global factor indices

FTSE has introduced a new series of global factor indices.

A factor can be thought of as any characteristic relating a group of securities that is important in explaining their return and risk.

The new indices are derived from the market capitalisation-weighted FTSE Developed and FTSE Emerging stock universes and are constructed to achieve a controlled exposure to the following factors: liquidity, momentum, quality, size, value and volatility.

The indices are designed to deliver exposure to the various factors whilst maintaining appropriate levels of diversifications and ensuring investability.

The six factors represent common characteristics for which there is a broad academic and practitioner consensus, supported by a body of empirical evidence across different geographies and time periods. The indices represent a tilt in a specific direction which has generated a risk premium (e.g. low volatility, small size, high liquidity etc).

The initial launch phase will consist of single factor indices. Indices exhibiting multiple factor tilts and directions will form part of the offering. In subsequent phases, the product offering will be expanded to include a wider geographic span of indices and the application of factor tilts to non market capitalisation-weighted indices.

Commenting on the launch, Peter Gunthorp, Managing Director of Research & Analytics at FTSE, said: “The new index series applies a consistent and transparent methodology to achieving a controlled factor tilt to any underlying index. This allows investors the granularity and consistency that they require when developing benchmarking tools and results in a mechanism for the creation of index-tracking funds [such as ETFs] and derivatives.”

FTSE Developed Momentum Factor Index (High Momentum)
FTSE Developed Illiquidity Factor Index (Low Liquidity)
FTSE Developed Quality Factor Index (High Quality)
FTSE Developed Size Factor Index (Small Size)
FTSE Developed Value Factor Index (High Value)
FTSE Developed Volatility Factor Index (Low Volatility)

FTSE Emerging Momentum Factor Index (High Momentum)
FTSE Emerging Illiquidity Factor Index (Low Liquidity)
FTSE Emerging Quality Factor Index (High Quality)
FTSE Emerging Size Factor Index (Small Size)
FTSE Emerging Value Factor Index (High Value)
FTSE Emerging Volatility Factor Index (Low Volatility)

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