New index answers growing demand for volatility strategies
27 November 2012
By ETFI Asia
S&P Dow Jones Indices has launched the S&P Pan Asia Low Volatility index. It has been designed to measure the performance of the 50 least volatile stocks in the region. The index aims to serve as a benchmark for low-volatility or low-variance strategies in Asia.
Risk control indices based on the S&P Pan-Asia Low Volatility index were launched at the same time, with target volatility levels of 4%, 5%, 8%, 10% and 15% in US dollar, euro, and Swedish krona.
Commenting on the launch, Vinit Srivastava, director, strategy indices at S&P Dow Jones Indices, said: “Low volatility indices offer a tool for investors who are increasingly looking for ways to include volatility controls into their portfolio. This new set of indices emphasises our continuing commitment to expanding our growing family of indices in Asia.”
The top 50 stocks from the S&P Pan Asia Ex-New Zealand Large Mid Cap index, are weighted by the inverse of their volatility, with the least-volatile stocks receiving the highest weights. Volatility is defined as the standard deviation of the security's daily price returns over the prior 252 trading days. The index draws from companies based in the following 12 countries: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, and Thailand. The index employs a buffer mechanism to control turnover. It also has a liquidity screen for constituents and incorporates criteria to ensure diversification.
S&P Dow Jones Indices’ series of low volatility indices comprises indices tracking Global, North American, European, and emerging equity markets.
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