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- GPW Benchmark has started the publication of two new strategy indices
- The new strategy indices are calculated based on the value of mWIG40TR and the transaction-based index WIRON®
GPW Benchmark has started publishing two new strategy indices mWIG40TRsh and mWIG40TRlv. The construction and objective of measuring economic realities of the new indices is the same as for the WIG20TRsht and WIG20TRlev indices already published by GPW Benchmark. Unlike the existing indices which are based on the WIG20TR index (the total return counterpart to WIG20) and the transaction-based index WIRON®, the new indices will reflect the performance of the mWIG40TR index (the total return counterpart to mWIG40).
mWIG40TRsh directly reflects the performance of mWIG40TR but in the opposite direction. If mWIG40TR rises by 1% at a trading session, mWIG40TRsh falls by 1%. A 1% decline in mWIG40TR at a session results in a 1% increase of mWIG40TRsh.
mWIG40TRlv also directly reflects the performance of mWIG40TR, its direction is the same as for mWIG40TR, but it is twice as large. If mWIG40TR rises by 1% at a session, mWIG40TRlv rises by 2%. A 1% decline in mWIG40TR results in a 2% decline of mWIG40TRlv.
The return or the cost, respectively, of an investment in the mWIG40TR portfolio is included in the formula of both indices, as well. For mWIG40TRsh, it is the result of the invested amount that the investor receives for short selling the mWIG40TR portfolio. For mWIG40TRlv, it is the cost of capital borrowed to buy shares in the mWIG40TR portfolio. Both the return and the cost of capital are expressed in the new indices in terms of the value of WIRON®.
As a result investors with expectations of negative stock market performance have the opportunity to generate positive returns on their investments if markets fall as predicted (mWIG40TRsh).
Investors expecting a rise in stock prices in the market have a chance of doubling the return on such an investment but they have to remember that their risk of loss is also double (mWIG40TRlv).
The historical performance of the new indices mWIG40TRsh and mWIG40TRlv has been recalculated backwards from 2 January 2019 (first value of WIRON®). The indices are published continuously every 15 seconds between 09:00 and 17:15.
Performance of new strategy indices mWIG40TRsh and mWIG40TRlv vs. mWIG40TR.
Figure 1. Performance of mWIG40TRsh vs. mWIG40TR
Figure 2. Performance of mWIG40TRlv vs. mWIG40TR
