We award The Index Standard® Ratings in six categories from Platinum, the highest to Gold, Silver, Copper, Neutral, and Watch, in that order.
The Index Standard® ratings are algorithmic and systematic so that each Index is evaluated in the same manner versus an appropriate benchmark. Critically, all indices are evaluated at the same time, ensuring consistency and appropriateness.
We put our index ratings through our rigorous model in seven categories, which we deem vital to evaluate index construction, robustness, and performance. Points scored in each of these categories contribute to the overall rating of each index.
We deem these 7 categories vital to the understanding of index construction, robustness, and performance. To score these 7 categories we utilize over 30 individual metrics covering construction methodology, transparency, weighting, index parameters, and several critical performance metrics. We've listed some of the key metrics.
This is a key category to understand the number and type of parameters used in the index, the tradability in times of market stress, and the erosion of returns to due tradability considerations.
This is a qualitative metric that explores the "small print", such as hidden fees or costs, as well as adherence to IOSCO principles.
This is an important category for The Index Standard®. We evaluate each index with several key risk metrics.
This is a critical category for readers concerned with avoiding capital losses. Volatility is not an all-encompassing measure. It can be deceptive at times. With this Capital at Risk category, The Index Standard® aims to identify if an index has any potentially significant risks. The value at risk metric and drawdowns are critical inputs into this category.
The Index Standard® evaluates several efficiency metrics to determine an index’s ability to balance off return and risk attributes and deliver returns commensurate with these risks. This is an important category for investors seeking to find indices with balanced returns.
This is a vital category for The Index Standard®. We analyze several critical return-related metrics, such as annualized returns, skew, and kurtosis. This category should not be viewed in isolation but balanced off with performance and risk.
“Mean reversion” is the concept where indices will typically return to their historical average. For instance, if an index has experienced a significant period of above-average returns relative to a benchmark, then its future returns may lag behind the same benchmark. With that in mind, the index might score low on its current attractiveness, and vice versa—the Index Standard® attempts to quantify this difficult to measure attribute for investors.