Barclays, Shiller bring new lineup of CAPE equity value-based indexes

By Susanna Moon

Chicago, May 2 – Barclays said it launched the Shiller Barclays CAPE Single Stock index family with Robert Shiller.

The new indexes aim to provide an alternative to market capitalization weighted indexes with a “unique” value bias based on the cyclically adjusted price earnings, or CAPE, ratio and momentum, according to a company announcement.

They will offer exposure to the United States and eurozone and then later in Japan and Asia ex-Japan. There also will be market-hedged index versions, which hold a long position in the Shiller Barclays CAPE US Single Stock index and a beta-adjusted short position in the benchmark index, “aiming to provide a market neutral value investment.”

Shiller and Barclays began working together in 2010 and then in 2012 began the Shiller Barclays CAPE Sector index family, which uses the CAPE ratio developed by Shiller and John Campbell in the 1980s to identify long-term undervalued sectors in the United States, Europe and Asia.

The new index range also uses the CAPE ratio to determine valuation for single stocks of established companies across regions, as opposed to sectors.

“We seek to invest in seasoned companies – old standbys – that also show good value by the CAPE ratio,” Shiller said in the release.

“This is a new and different approach to value investing that is designed to try to come closer to its original motivation: find stocks that are well established and relatively forgotten, with a long history of earnings but underpriced in the market.”

Added Ben Redmond, director in EFS Solutions, “Barclays is delighted to continue our long standing collaboration with renowned author and Yale economist Robert Shiller, producing indices which draw on some of his well-known investing concepts.”

“This launch highlights Barclays’ commitment to bringing clients a full array of investable indices based on academic research,” Redmond said.

Noted David Haefliger, EFS Solutions, “The Shiller Barclays CAPE Single Stock index family will offer investors a new way to gain exposure to underpriced stocks. Knowledge of the equity value premia has existed since the 1930s, and we believe this innovative take on it will allow investors a new way to access attractively priced shares.”

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