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Dow Jones Indexes, a leading global index provider, and Transparent Value LLC today announced the launch of the Dow Jones Required Business Performance (RBP) Index series. The new indexes measure the likelihood that a company can deliver the performance required to support its current stock price according to Transparent Value’s proprietary RBP methodology. The Dow Jones RBP Large-Cap 130/30 Indexes, the first indexes in the series, use the RBP probability metrics to create 130/30 investment strategy indexes based on U.S. large-cap stocks.
“The Dow Jones RBP Indexes are part of the next generation of intelligent index design. The RBP approach uses an innovative methodology that serves as a superior basis for a 130/30 index. Developed by Transparent Value, the RBP method applies a unique, transparent and rules-based methodology to analyze stocks that complements Dow Jones Indexes’ mission of providing the investment community with objective, rules-based indexes,” said Michael A. Petronella, president of Dow Jones Indexes.
“We are excited to partner with Dow Jones Indexes to launch the Dow Jones RBP Indexes. We embrace a rules-based approach to investing just as Dow Jones Indexes does in developing indexes,” said Julian Koski, co-founder of Transparent Value LLC. “The central idea behind the RBP methodology is to help investors objectively understand the valuation of publicly traded companies. We believe the fundamental investment question is not whether a company is under- or overvalued, but whether the management of that company can deliver the required business performance to support its stock price.”
The Dow Jones RBP Indexes are quantitative strategy indexes developed and calculated by Dow Jones Indexes using rules-based, published analytics supplied by Transparent Value, LLC. The new indexes are designed to underlie financial products.
The index universe for the Dow Jones RBP Large-Cap 130/30 Index is defined as all stocks included in the Dow Jones Wilshire U.S. Large-Cap IndexSM . RBP probability scores are calculated by Transparent Value for each of the 750 companies in the Dow Jones Wilshire U.S. Large-Cap Index. The 30 stocks with the highest RBP probability scores become components of the Dow Jones RBP Large-Cap Leading 30 Index. The 30 stocks with the lowest RBP probability scores become components in the Dow Jones RBP Large-Cap Lagging 30 Index. Components for the Dow Jones RBP Large-Cap Leading and Lagging 30 indexes are subject to a screen that requires components to have a three-month average daily trading volume of at least $2.5 million USD. The Dow Jones RBP Large-Cap 130/30 Index measures the performance of the 750 stocks in the Dow Jones Wilshire U.S. Large-Cap Index as well as an additional 30% long position in the Dow Jones RBP Large-Cap Leading 30 Index and 30% inverse exposure to the Dow Jones RBP Large-Cap Lagging 30 Index.
Also available are the Dow Jones RBP Large-Cap Growth 130/30 Index and Dow Jones RBP Large-Cap Value130/30 Index, which follow the same methodology as the broader index. They are derived from the Dow Jones Wilshire U.S. Large-Cap Growth IndexSM and Dow Jones Wilshire U.S. Large-Cap Value IndexSM, respectively.
The Dow Jones RBP Large-Cap 130/30 Index, Dow Jones RBP Large-Cap Leading 30 Index and Dow Jones RBP Large-Cap Lagging 30 Index are rebalanced on a quarterly basis. The 750 stocks that make up the core of the index are weighted by float-adjusted market capitalization. Components in the leading/lagging sub-indexes are equal weighted. Back-tested estimated daily history is available back to December 31, 2004 . For more information, please visit www.dowjonesRBP.com.
