Dow Jones Indexes has launched the Dow Jones RBP US Small-Cap Index, which is designed to measure the performance of 100 top-ranked small-cap stocks based on average fundamental scores and RBP probabilities supplied by Transparent Value, LLC.
RBP, which stands for Required Business Performance, is calculated by Transparent Value. Transparent Value reverses a traditional discounted cash flow model to measure the future business performance required for a company to support its current stock price. The goal is to measure the likelihood that the company can deliver such required business performance by applying the RBP® methodology over specified time periods.
The Dow Jones RBP US Small-Cap Index is the latest addition to the Dow Jones RBP series of quantitative strategy indexes offered by Dow Jones Indexes and Transparent Value LLC, a New York-based asset management and financial information services company. The Dow Jones RBP Indexes are built upon patent-pending proprietary rules-based analytics supplied by Transparent Value.
“The Dow Jones RBP US Small-Cap Index is a measurement tool that provides a unique insight into the small-cap equities market that is not available anywhere else,” says Michael A Petronella (pictured), President, Dow Jones Indexes. “Using RBP’s proprietary methodology together with Dow Jones Indexes’ experience in index construction and calculation, our two firms have once again demonstrated the Dow Jones RBP Index family’s commitment to delivering innovative and useful methods of measuring the equity markets.”
Julian Koski, Managing Director and Co-Chief Executive Officer of Transparent Value, said: “By seeking to objectively quantify the ability of management to deliver the RBP to support its stock price, the Dow Jones RBP US Small-Cap Index is meant to offer a window into an asset class whose performance over time has been a challenge to analyse. And, particularly with the current unsettled nature of the markets, I believe this index will be welcomed by investment professionals on the look-out for new ways to evaluate risk and return.”
Stocks eligible for the Dow Jones RBP US Small-Cap Index include the largest 750 equities in the Dow Jones US Small-Cap Total Stock Market Index that pass screens for minimum free float, stock price and trading volume. Factors considered for stock selection are return on equity, free cash flow yield, asset growth and RBP probabilities. The index is RBP®-probability weighted.
The Dow Jones RBP US Small-Cap Index is reviewed quarterly, and on an on-going basis for unusual events such as delistings, bankruptcies, mergers and takeovers. Calculation began on 30 November, 2011. Back-tested historical data for the index have been calculated daily back to 31 December, 1998, with a base value set at 1000.
The Dow Jones RBP US Small-Cap Index is the sixth addition to the Dow Jones RBP Indexes family in 2011. In August, The Dow Jones Islamic Market RBP US 50 Index was launched; in April, three large-cap “style” indexes of growth and value stocks were launched, in addition to the series’ first index to utilise dividends to select and weight companies.
