Smart Choices with Index Providers

Smart beta’s main objective is to obtain alpha, lower risk or increases diversification at a cost lower than straight index investing. Smart beta indices is a combination of the efficient market hypothesis and value investing. The approach applies to popular asset classes, such as equities, fixed income, commodities, and multi-asset classes.

It emphasizes capturing investment factors or market inefficiencies in a rule based transparent way. Alternative weighting schemes may be used such as volatility, liquidity, quality, value, size and momentum.

Dividend Indices

Dividend investing is one of the best ways to accumulate wealth over the long term. When a company pays regular dividends to generate income and cash flows to share profits with investors.

Select Dividend indices measure the best-performing stocks based on their dividend yield performance. Companies are selected and weighted solely based on historical dividend payments.

The indices may contain any number of stocks. The stocks are chosen based on factors like dividend per share growth rate, dividend pay-out percentage rate and average daily trading volume. Components are then weighted according to the dividend yield.

Maximum Dividend Indices aim to maximise the dividend yield of the index portfolio on a short term basis and are available for global and regional markets. They represent the companies with the highest dividend yield, based on the 3-month dividend forecast. Components are weighted according to their expected liquidity-adjusted dividend yield.

Index Providers

Index providers calculate and distribute stock and other asset classes. One of the main objectives of the index provider is to classify and define markets because their indices represent a market and provide a benchmark of performance for that market or sector.

The group comprises of diverse entities e.g. - stock exchanges, financial institution, analytical and research companies as well as financial data providers. Their role increases along with systematically growing importance of index investment instruments. The decision made by them affects the allocation of capital, mainly on a microeconomic and macroeconomic scale.

Source: https://indexcalculations.home.blog/2019/11/14/smart-choices-with-index-providers/

Smart Beta Indices and Other Smart Choices

A custom index is a tailor-made solution designed to suit clients’ unique mandates or investment strategies clients can either modify existing index or create an entirely new index based on specific requirements. ETF sponsors, derivative desks, self-indexers, structured product teams, exchanges and plan sponsors all use custom indices as the basis for new financial products and benchmarks.

Custom indices are available across a variety of asset classes, including but not limited to equities, commodities and fixed income.

It is possible to calculate history for a custom index if the necessary data is available for the desired historical time frame.

An index can be calculated every 15 seconds-24 hours a day, seven days a week or using a pre-determined frequency.

Smart Beta Indices

Smart beta’s main objective is to obtain alpha, lower risk or increases diversification at a cost lower than straight index investing. Smart beta indices are combination of the efficient market hypothesis and value investing. The approach applies to popular asset classes, such as equities, fixed income, commodities, and multi-asset classes.

It emphasizes capturing investment factors or market inefficiencies in a rule based transparent way. Alternative weighting schemes may be used such as volatility, liquidity, quality, value, size and momentum.

Thematic Investment

Thematic investing is an investment approach with a focus on broader macroeconomic themes that a fund manager can use to identify strong companies.

In Thematic investment, the manager picks things they think are important.

One of the benefits includes the strategic context, getting behind future tailwinds, narrowing the universe and focusing further research while avoiding spot forecasting or market timing.

The opportunity comes when more people believe in same the same themes and investment is driven in the direction of these companies. The shift of capital can drive superior performance in a thematic portfolio if the companies in the indexes benefit from the business.

Its advocates say it is an effective strategy because it concentrates securities in an idea that is still misunderstood and unappreciated in the market place.

Source: https://indexcalculations.news.blog/2019/11/13/smart-beta-indices-and-other-smart-choices/

Index Calculation and Maintenance Together

Robotics index is designed to track the performance of companies engaged in artificial intelligence and robotics segment of the technology, industrial, medical and other economic sectors. These companies are expected to benefit from the increased adoption and utilization of robotics and artificial intelligence. The index is constructed by selecting stocks from the parent index. All stocks from the parent index can be selected which satisfy any of the following criteria-

• On business segments
• On company summary description

Index Calculation
Index calculation is done using the free-float market capitalization methodology. At the time of rebalancing of shares/ change in index constituents/ change in investable weight factors, the weight of the index constituents is capped at applicable levels. Weight of such stock may increase between the rebalancing periods.

PR Index Value
Base market capital of the index is the aggregate market capitalisation of each scrip in the index during the base period. The market capitalisation during the base period is equated to an index value of 1000 known as the index base value.

Total Return Index Calculation
This reflects the return one might get if invested in the index portfolio. Only stock price movements are taken into account. However, the price indices do not consider the return from dividend payments of index constituent stocks. To get a true picture, the dividends received from the index constituent stocks also needs to be included in the index movement.

Index Maintenance
Index maintenance has very crucial in ensuring the stability of the index. The indices are reconstituted semi-annually. Additional reconstitution may take place if index constituent undergoes a scheme of arrangement for corporate events such as merger, spin-off or suspension etc. Changes in the index level reflect changes in the market capitalisation of the index which are caused by stock price movements in the market. When a stock is replaced by another stock, the index divisor is adjusted so the change in index market value that results from the addition and deletion does not change the index level.
Source: http://indexcalculations.website2.me/blog/index-calculation-and-maintenance-together

Artificial Intelligence Index Making you Intelligent

Artificial Intelligence Index

Artificial intelligence index is an effort to track and visualize data regarding artificial intelligence. It is comprised of companies that use artificial intelligence.

Artificial intelligence indices track the performance of companies that are positioned to benefit from the development and utilization of artificial intelligence in their products and services. The index intends to reflect the performance of the companies engaged in applications of artificial intelligence. Advancement in artificial intelligence companies takes advantage of the long-term trend towards automation, which might affect their revenue. The data allows a detailed breakdown of revenue sources of the eligible companies, helping this index to select companies with substantial positive artificial intelligence exposure.

Thematic Index

NSE Indices Limited calculates series of thematic indices to show the performance of the companies that represent a movement in a specific theme. Thematic indices are calculated by NSE Indices taking into the account the stock traded on the national stock exchange. Free float market capitalization method is used.

• NIFTY COMMODITY INDEX- This reflects the behaviour and performance of the diversified portfolio of companies representing commodities such as oil, petroleum, cement, sugar, metals and mining.
• NIFTY INDIA CONSUMPTION INDEX- This reflects the behaviour of the diversified portfolio of companies representing the domestic consumption centre.
• NIFTY ENERGY INDEX- This reflects the behaviour of a diversified portfolio of companies representing petroleum, gas and power sector.
• NIFTY PSE INDEX- This reflects the behaviour of public sector enterprises (PSE) companies.
• NIFTY INFRASTRUCTURE INDEX- This index reflects the behaviour of companies that represent infrastructure defined under basic industries.

Index Development

Information about the price movement of products in the financial, commodities or any other markets is known by index. Index development is done to measure the price movement of stocks, bonds and other forms of investment. Index development provides a historical comparison of returns of money invested in the stock market against gold or debt. They give out highly up to date information.

Source: https://indexcalculations.wordpress.com/2019/11/08/artificial-intelligence-index-making-you-intelligent/