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Research & Insights

RVX futures as a hedge for small cap–specific risk

  • Volatility products can be used to hedge downside risk in equity portfolios
  • RVXSM futures provides a U.S. small cap equity focused alternative to CBOE Volatility Index® (VIX® Index) futures
  • RVX futures hedges can potentially be more effective when the risk is specific to small cap stocks

Summary

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How indexes change

Coping with market changes

Financial markets change continuously: markets increase and decrease in relative size, companies are listed, delisted, taken over and restructured, and securities produce cash flows. An important challenge for an index provider is to record the evolution of markets in a consistent and transparent way.

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From frontier to developed – The FTSE ASEAN Index Series

The FTSE ASEAN Index Series provides a comprehensive range of benchmarks to measure the performance of stocks within an increasingly integrated and fast-growing economic region.

ASEAN

The Association of Southeast Asian Nations (ASEAN) was set up in 1967 and initially included five member states: Indonesia, Malaysia, Philippines, Singapore and Thailand. With the addition of Brunei Darussalam (1984), Vietnam (1995), Lao PDR and Myanmar (1997), and Cambodia (1999), ASEAN’s membership has since expanded to ten.

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Smart beta: 2015 global survey findings from asset owners

 

The first iteration of “smart beta” can be traced to the 1980s through cap and style distinctions, there is no denying that as an investment tool, the smart beta approach has arrived and will continue to transform and impact the investment landscape. Today, “smart beta” is a term often used to define a broad range of investment strategies that are generally categorized by two types of exposures: strategy-based and factor-based.

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The Russell Pure Style Indexes: Tools for the next level of style investing

  • The Russell Pure Style Indexes are designed to provide focused exposure to the value and growth segments of the U.S. equity market.
  • The Pure Style Indexes methodology extends that of Russell’s standard Value and Growth Indexes.
  • While aligned with the standard style indexes, the Pure Style Indexes have increased exposures to value and growth style factors, which resulted in greater distinction in returns, in historical simulations.


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Preparing for China’s inclusion in global benchmarks - A flexible approach to managing the transition

  • Following further increases in R/QFII allocations and improvements in the R/QFII application process, on May 26, 2015 FTSE Russell announced the start of its transition to include China A Shares in its widely followed global benchmarks, with the launch of new FTSE China A Inclusion Indexes.
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Small cap defensive: Oxymoron, or simply overlooked?

An analysis of Russell 2000® Defensive Index® performance, characteristics and factors compared to the Russell 2000® Index

Key points

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Passive and fundamental index investing: A factor analysis

Interest in passive investing has risen in recent years. Many investors, increasingly cost-sensitive in the wake of the financial crisis, are not convinced that active management will deliver excess returns, net of fees, over their benchmarks. Passive investing has traditionally focused on replicating cap-weighted benchmark indexes, either through index mutual funds, exchange traded funds (ETFs) or the creation of matching in-house portfolios. Cap-weighted indexes provide cost-effective exposure to various segments of the equity market with a high degree of liquidity and capacity.

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The Russell 2000 Index in a rising interest rate environment - Evidence from past cycles

  • During the last three periods of rising interest rates, the Russell 2000 Index experienced initial declines, but in two of these three instances, it recovered from intra-year lows to finish each subsequent 12-month period in positive territory. There was no clear pattern in sector leadership.
  • All three periods of interest rate hikes we examined have occurred at or near an inflection point in market volatility. However, for two of the periods, volatility began to increase after the Fed began raising rates, while in the third, volatility actually declined.
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FTSE GDP Weighted Indexes

GDP-weighted indexes

From time to time the weighting of certain countries within capitalisation-weighted equity indexes may diverge significantly from those countries’ share of global GDP.

An example of a dramatic divergence between a country’s global equity market footprint and its economic importance comes from late-1980s Japan. In 1989, according to the International Monetary Fund (IMF), Japan’s share of world economic output, based upon a purchasing power parity (PPP) valuation of global currencies, was just under 10 percent.

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