Barclays Launches ETN Based on Shiller Ratio
October 12th 2012 at 6:00am by Tom Lydon
Adding to the growing number of enhanced or “intelligent” beta indexing strategies, Barclays, the bank behind the iPath suite of exchange traded notes, launched a new ETN based on Yale finance professor Robert Shiller’s cyclically adjusted P/E ratio, or CAPE.
According to a press release, the Barclays ETN+ Shiller CAPE ETN (NYSEArca: CAPE) will try to reflect the performance of the Shiller Barclays CAPE US Core Sector Index, which provides long exposure to four undervalued U.S. equity sectors that show strong price momentum over the last twelve months. The index follows an equal-weight methodology.
“The ETN utilizes Professor Shiller’s frequently cited CAPE ratio applied for the first time to sectors to crate a value-oriented sector strategy developed through research conducted by Barclays and Professor Shiller over the course of a year-long collaboration,” Laurence Black, Director in Equity and Funds Structured markets at Barclays, said in the press release.
The CAPE ratio is calculated by taking the ratio of stock prices to the moving average of the previous 10 years’ earnings, deflated by inflation. Consequently, it can be used as a long-term measure of equity market valuations.
ETNs are unsecured debt obligations backed by the issuing bank, or Barclays Bank PLC in this case. Consequently, the funds are subject to the credit worthiness of the issuer. [Exchange Traded Notes]
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Max Chen contributed to this article.
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