The Dow Jones Select MicroCap Index was created to provide market participants with an accurate and reliable measure of the U.S. microcap segment. The index has been licensed to First Trust Advisors L.P. as the underlying for an upcoming exchange-traded fund (ETF). The ETF now enables investors—for the first time—to participate in the performance of microcap stocks.
“Microcap stocks perform very differently from larger stocks, and have yielded even greater rewards in recent years,” said Michael A. Petronella, president, Dow Jones Indexes/Ventures. “The Dow Jones Select MicroCap Index follows a superior methodology, which eliminates problems usually associated with this category—such as illiquid financially instable stocks.”
The initial stock selection pool is determined by ranking all NYSE stocks by full-market capitalization into 10 equal-numbered deciles, with deciles nine and 10 defining the microcap size range. Issues then are added from the AMEX and Nasdaq exchanges that fit this size range. The next step is a screening of this universe by market capitalization and trading liquidity screens, followed by applying further fundamental screens such as price/earnings ratio, price/sales ratio, profit change, operating margin and performance return screens.
The Dow Jones Select MicroCap Index is reviewed annually each September. The components, weightings and daily closing values of the Dow Jones Select MicroCap Index are available on www.djindexes.com.
