S&P Dow Jones Indices has created the S&P 500 Low Volatility Enhanced Index adding to its range of factor-based indices. The index aims to balance low volatility, yield and liquidity, and has been designed to be an investable index.
The Index has been licensed to Deutsche Bank.
The S&P 500 Low Volatility Enhanced Index is comprised of 50 constituents from the S&P 500. The constituents that have a dividend yield less than the S&P 500 are removed from the selection list.
The remaining stocks are then ranked by their beta, which measures the sensitivity of the stocks’ returns relative to the S&P 500. The 50 stocks with the lowest beta are selected for the index.
Vinit Srivastava, senior director, Strategic Indices, S&P Dow Jones Indices said: “We are very pleased to add the S&P 500 Low Volatility Enhanced Index to our expanding family of factor-based indices. This simple, but innovative, index seeks to offer investors a means of measuring low volatility strategies, which tend to outperform in times of market turbulence.”
Giulio Alfinito, head of Equity Investor Products Europe, Deutsche Bank added: “The S&P 500 Low Volatility Enhanced Index implements the low beta investment concept in a simple and transparent way. The index benefits from an innovative liquidity based weighting system and low exposure to market risk, making it a potential underlying asset for capital protected structured products.”