stoxx index methodology guide (portfolio based indices) - STOXX.com
stoxx index methodology guide (portfolio based indices) - STOXX.com
stoxx index methodology guide (portfolio based indices) - STOXX.com
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<strong>STOXX</strong> INDEX METHODOLOGY GUIDE<br />
5. STOCK CHARACTERISTICS<br />
5.6. WEIGHTING FACTOR<br />
Weighting factors are applied in price-weighted <strong>indices</strong> instead of the factor “shares times free-float”.<br />
Weighting factors are calculated on the basis of other criteria like for example dividend data. Weighting<br />
factors are adjusted for corporate actions. Please consult the <strong>STOXX</strong> Calculation Guide for further details.<br />
5.7. FREE-FLOAT MARKET CAPITALIZATION<br />
The free-float market capitalization is the share of a stocks’ total market capitalization that is available for<br />
trading:<br />
Free-float market capitalization = free-float factor × full market capitalization<br />
The weighting factor multiplied by the price of the share determines the weight of a <strong>com</strong>pany within a<br />
price-weighted <strong>index</strong>.<br />
5.7.1. WEIGHTING CAP FACTORS<br />
The factor ensures maximum weighting for a stock at the time of the review. The weighting cap factors for<br />
stocks are reviewed on a quarterly basis except for the <strong>STOXX</strong> Select Dividend Index and the <strong>STOXX</strong> Strong<br />
Style <strong>indices</strong>, where an annual update is provided. Weighting cap factors are updated during the regular<br />
<strong>index</strong> reviews only and not adjusted for corporate actions.<br />
5.7.2. LIQUIDITY SCALING FACTORS<br />
Liquidity scaling factors are used in the <strong>STOXX</strong> Optimised <strong>indices</strong>. The factor is <strong>based</strong> on the average daily<br />
turnover (ADTV) of the stock over the most recent three-month period, measured one day before the<br />
underlying data announcement date. The factor is kept constant between reviews and is calculated as<br />
follows:<br />
1. Determination of free-float market capitalization weights:<br />
w it<br />
pit<br />
�nit<br />
� ffit<br />
� n<br />
p �n<br />
� ff<br />
�<br />
i�1<br />
it<br />
it<br />
it<br />
Where:<br />
pit =Price of <strong>com</strong>pany (i) at time (t)<br />
nit =Number of shares of <strong>com</strong>pany (i) at time (t)<br />
ffit =Free-float factor of <strong>com</strong>pany (i) at time (t)<br />
n =Number of shares<br />
2. Calculation of liquidity value:<br />
lv<br />
it<br />
�<br />
ADTV<br />
it<br />
wit<br />
� ADTV3m<br />
Where:<br />
wit =Free-float market capitalization weight (i) at time (t)<br />
ADTVit =Average Daily Traded Value (i) at time (t)<br />
ADTV3m=Average of ADTV over the past three months<br />
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