Dow Jones Indexes, a global index provider, has launched the Dow Jones US Economic Stimulus Index.
Dow Jones Indexes, a global index provider, has launched the Dow Jones US Economic Stimulus Index.
The index measures the performance of leading US companies drawn from industries that are expected to receive stimulus dollars from the American Recovery and Reinvestment Act of 2009.
The 50-stock index seeks to capture the "momentum" of the US economic stimulus package and its effect on the largest and most liquid stocks in six economic segments.
"The American Recovery and Reinvestment Act represents a significant strategic investment in the US economy and as such is anticipated to have a positive impact on the stock market, which is an indicator of economic health," says Michael A. Petronella, president, Dow Jones Indexes. "Applying a systematic methodology and blue-chip approach to the segments of the American Recovery and Reinvestment Act makes the Dow Jones US Economic Stimulus Index an attractive underlying for investment products such as exchange-traded funds."
Dow Jones Indexes mapped the key areas targeted by the American Recovery and Reinvestment Act to six core categories: alternative energy, construction and materials, energy grid, environment, technology, and telecom/internet.
To be eligible for inclusion, a company must be a component of the Dow Jones US Total Stock Market Index, must have a three-month minimum average daily trading volume of USD5m and must be categorized in one of the six categories determined by Dow Jones Indexes.
Within each of the six categories, stocks are selected top-down based on float-adjusted market capitalization until the target component count per category is achieved. The number of components is determined based on the percentage of stimulus dollars allocated to each category. Of the 50 index components 20 are derived from the category construction and materials, ten components from alternative energy, and five components from each of the remaining categories.
The top five index components by free-float market capitalization are Microsoft (technology), AT&T (telecom/internet), General Electric (alternative energy), International Business Machines (technology), and Cisco Systems (telecom/internet).
As of 26 May 2009 the Dow Jones US Economic Stimulus Index is up 1.62 per cent since its inception on 31 December 2008.
