Dow Jones Indexes launches Required Business Performance indexes

By Devika Patel

Knoxville, Tenn., March 11 - Dow Jones Indexes said in a press release it has formed a new series of indexes that measure the likelihood that a company can deliver the performance required to support its current stock price, according to Transparent Value's proprietary Required Business Performance methodology.

The Dow Jones RBP Large-Cap 130/30 indexes, the first indexes in the series, use the Required Business Performance probability metrics to create 130/30 investment strategy indexes based on U.S. large-cap stocks.

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 index.

Required Business Performance 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 Required Business Performance probability scores become components of the Dow Jones RBP Large-Cap Leading 30 index. The 30 stocks with the lowest Required Business Performance 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.

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 Value 130/30 index, which follow the same methodology as the broader index. They are derived from the Dow Jones Wilshire U.S. Large-Cap Growth index and Dow Jones Wilshire U.S. Large-Cap Value index, 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 weighted equally.

"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," Dow Jones Indexes president Michael A. Petronella said in the release.

New York-based Dow Jones Indexes develops, maintains and licenses indexes for use as benchmarks and as the basis of investment products.

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