“Over the last several years, S&P has spoken with a wide range of index users on issues surrounding style index construction and usage,” says David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor’s. “Two defining needs have emerged. First, investing and trading situations require a complementary set of broad style indices and narrower pure style indices. Second, analysts need consistency between the style definitions they use at the stock level and the style definitions used by benchmark providers. Recognizing these needs, Standard & Poor’s will offer two complementary sets of style indices: Style and Pure Style indices.”
Style Index Series
The Style index series is market capitalization-weighted, exhaustive and divides the complete market cap of each parent index into growth and value indices of approximately equal sizes. Stocks that do not have pure growth or pure value characteristics will have their market caps distributed between the growth and value indices.
Pure Style Index Series
The Pure Style index series consists of those stocks that exhibit only strong growth or value characteristics. Stocks within each pure style index are weighted according to their style scores. This eliminates any size-bias. Each pure style index contains approximately one third of the market cap of the parent index.
New Style Methodology
The new growth and value indices will be based on the style scoring methodology developed by Citigroup, and used in the S&P/Citigroup benchmark index series. Stocks are scored for both value and growth attractiveness by using three growth factors and four value factors. These scores will make it possible for analysts to consistently analyze style definitions at both the stock level and index level. The new style indices will be branded as the S&P/Citigroup Growth and Value Series.
Style and Pure Style indices will also be created for the S&P Composite 1500, S&P 900 and S&P 1000.
Timeline
- On September 16, 2005, Standard & Poor’s will begin publishing the U.S. S&P/Citigroup Growth and Value index series and related data on an end-of-day basis.
- On December 16, 2005, the U.S. S&P/Citigroup Growth and Value series will become Standard & Poor’s official style series, replacing the S&P/Barra indices; this date coincides with expiries of index futures and options contracts. Real-time calculation for the new index series begins.
- Real-time dissemination of the S&P/Barra indices will cease on December 16, 2005; end-of-day values for the old S&P/Barra series will be available until June 30, 2006.
About Standard & Poor’s
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 6,000 employees located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.
