S&P Dow Jones Indices has added to its range of factor-based investment tools with a selection of indices that measure stocks with a high 'quality' score.
Scoring stocks based on quality – a factor that takes in return on equity, accruals ratio and financial leverage ratio – is one of several alternative strategies to the traditional method of weighting stocks according to market capitalisation.
The launch of the 12 indices follows the firm's unveiling of Low Beta and Intrinsic Value index sets earlier this year, which are also aimed at giving investors an alternative to cap-weighting – a technique known as “smart beta”.
“Quality is a risk factor that is distinct from other known factors like size, value, momentum, and low volatility,” says Vinit Srivastava, senior director of strategy indices at S&P Dow Jones Indices, who adds that the new tools capture the characteristics of high quality companies.
The set of indices includes US, European, Asian, Japanese, developed and emerging market products, and are based on the S&P Global Broad Market Index or other headline benchmarks.
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