S&P Dow Jones Indices (S&P DJI) has launched a new smart beta index series constructed based on the past relative performance of stocks.
The S&P Momentum Indices series measures the performance of securities in global equity markets, and focusses on those that have exhibited persistent outperformance. This reflects the theory that the relative strength of stocks in the past predicts relative performance over the next three-to-12 months.
It seeks to measure momentum in various markets through a rules-based methodology and ensures reasonable levels of liquidity, capacity and turnover. It is constructed from the constituents of the S&P Global Broad Market Index, which measures global stock market performance.
There are currently 14 headline indices under the umbrella of the S&P Momentum Indices family across different regions:
- S&P Momentum Global LargeMidCap
- S&P Momentum Developed LargeMidCap
- S&P Momentum Developed Ex. U.S. LargeMidCap
- S&P Momentum Developed Ex. Japan LargeMidCap
- S&P Momentum Emerging LargeMidCap
- S&P Momentum Europe LargeMidCap
- S&P Momentum Pan Asia LargeMidCap
- S&P Momentum Pan Asia Ex. Japan LargeMidCap
- S&P Momentum Japan LargeMidCap
- S&P Momentum United States LargeMidCap
- S&P Momentum China A-Share
- S&P Momentum South Africa
- S&P 500 Momentum
- S&P Europe 350 Momentum
Alex Yang, communications manager at S&P DJI, told Asia Asset Management that the momentum factor has been increasingly embraced by global investors. “As an important component of our alternative beta index offering, the S&P Momentum Indices capture the important and well-documented factor of momentum; a risk factor increasingly gaining recognition by investors globally. The development of an index-based momentum strategy represents an opportunity for individual and institutional investors, as it expands the toolkits investors can use in their portfolio construction and asset allocation,” he said.
Vinit Srivastava, senior director of strategy indices, added: “A complement to our existing single factor indices, this latest series supports greater choices to investors who wish to leverage momentum within a strategic allocation portfolio of alternative beta strategies, or for a tactical strategy when market conditions are favourable.”
