Index provider Stoxx has launched the Stoxx Europe 600 Equal Weighted Index, which represents the components of the Stoxx Europe 600 Index irrespective of their market capitalisation by weighing them equally.
The new index is designed to underlie financial products such as exchange-traded funds or structured products.
"With the launch of the Stoxx Europe 600 Equal Weighted Index we take a new weighting approach to Europe’s most widely recognised benchmark index," says Hartmut Graf, chief executive officer, Stoxx. "Our new index is a superior tool for market participants who seek exposure to an equal weighted portfolio consisting of European small, mid and large cap companies, while being able to rely on the transparent and rules-based methodology of the widely recognised Stoxx Europe 600 Index."
The index follows the same methodology as the Stoxx Europe 600 Index, except for the weighting process. In the new index, all components share an equal weight, leading to a stronger exposure to small cap companies from five per cent to 33 per cent, while reducing the overall weight of large cap companies from 83 per cent to 33 per cent. As relative weights shift over time, the index is rebalanced quarterly and weights are brought back to equal allocations.