*Index launch expected no later than April 2015.
[1] Fama, E.F. and French, K.R., (1996). Multifactor Explanations of Asset Pricing Anomalies. Journal of Finance. 51, 55-84.
[2] Lakonishok, J., Shleifer, A.,Vishny, R. W., (1994). Contrarian Investment, Exptrapolation, and Risk. Journal of Finance. Vol 69 (5), 1541-1578.
[3] EBITDA: earnings before interest, tax, depreciation, and amortization.
[4] Combining different factors (measures) can be achieved through the Z-score method. A Z-score is a stock’s standardized exposure to a factor. For each stock in an investment universe, subtract the universe’s mean factor exposure from the individual stock’s factor exposure. Then divide this number by the standard deviation of the factor exposures for the universe. Z-scores can then be added to derive an overall score and subsequent exposure to a set of factors.
This article was written by Sunjiv Mainie, senior director and head of research & design (EMEA), S&P Dow Jones Indices.
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