S&P Targets Volatility In Pummeled Indexes
Source: http://www.indexuniverse.com/sections/newsinfocus/4925-sap-targets-volatility-in-pummeled-indexes.html?Itemid=3&utm_source=straightstocks.com&utm_medium=sidebar&utm_campaign=rssPosted on Tuesday, November 18th, 2008 | In Exchange Traded Funds
If the risk level moves above the established target, the cash level is increased in order to maintain the target volatility.
Standard & Poor’s is zeroing in on volatility levels in four indexes within its Emerging Market and Global Thematic Index Series, indexes that have turned in terrible performance amidst the market crisis.
The volatility targeting approach has been common in the structured products arena, but is new to the indexing world, S&P said in a statement. The risk control indexes work by setting a specific volatility target based on the historical volatility of an underlying index, and monitoring that level to make sure it remains constant.
If the risk level moves above the established target, the cash level is increased in order to maintain the target volatility. If the risk level moves below the threshold, the index will employ leverage to maintain the target volatility.
The risk control index overlay will be applied to the S&P BRIC 40 Index, S&P Latin America 40 Index, S&P South East Asia 40 Index and S&P Global Infrastructure Index.
A look at recent performance in exchange-traded funds linked to these indexes lends credence to the belief that queasy investors might be looking for a little more in the way of risk control. The SPDR S&P BRIC 40 ETF (NYSE Arca: BIK) is down 54.23%, year-to-date, through Oct. 31. The iShares S&P Latin America 40 Index Fund (NYSE Arca: ILF) is down 48.99% in the past one year, through Oct. 31.
The four debut risk control indexes and their target levels of risk are:
- S&P BRIC 40 Risk Control 18% Index
- S&P Latin America 40 Risk Control 18% Index
- S&P South East Asia 40 Risk Control 18% Index
- S&P Global Infrastructure Risk Control 12% Index
Last 5 posts by IndexUniverse Staff
- NASDAQ Launches Index Tracking TARP Companies - January 8th, 2009
- Dec. 8: The Best ETF Articles In The National Media - January 8th, 2009
- Jan. 7: The Best ETF Articles In The National Media - January 7th, 2009
- DJ-AIG Commodities Index Changing Weightings - January 6th, 2009
- Jan. 6: The Best ETF Articles In The National Media - January 6th, 2009
BRIC 40 ETF, Exchange Traded Funds, index universe, S&P, S&P Global Infrastructure;, S&P Latin America;, S&P South East Asia;, Standard;
 About IndexUniverse Staff (http://indexuniverse.com)
IndexUniverse encompasses the world of indexing and beyond. Our website and related subsites cover product and market developments related to index funds, exchange-traded funds (ETFs), index derivatives (futures / options / swaps), and the sophisticated investment strategies which use these financial tools. Our goal is to provide the industry's best news, columns, research, and features about the dynamic field of index-based investing and trading. Industry professionals, individual investors, business/finance students and academic researchers will find various features targeting their interests and needs. We also provide valuable tools and data to assess markets and investment products, and specialized discussion boards for our registered members to exchange cutting-edge ideas and market views. We aim to be educational, thought-provoking, and most importantly, rigorously independent in our perspective. The development of IndexUniverse was a global effort, originally led by Steven Schoenfeld and Jim Wiandt, supported by John Spence and a diverse team in the U.S., Europe and Latin America, and enhanced by editorial contributors from around the world. The site is now managed solely by Jim Wiandt and the global Index Publications LLC team. The site was originally started by Steven as a data and information complement to his book, Active Index Investing, published by Wiley Finance in July 2004. As he recognized the need and potential for such a resource, in August 2003, Steven partnered with Jim, who as editor of The Journal of Indexes similarly recognized the industry's need for timely, useful and independent information on products and markets. |
No recommendations, either expressed or implied, are being made to buy, sell, hold or short any of the mentioned stocks. No legal, tax or accounting advice is expressed or implied. Always contact your attorney, CPA, or tax advisor before acting on any legal or tax issues. StraightStocks.com is not responsible for the content, products, or services of any of the advertisers on this site. StraightStocks.com receives compensation from advertisers on this blog. Services and products referred to herein are trademarks, registered trademarks, servicemarks, and/or registered servicemarks of their respective trademark or servicemark owners.