Index Development

Do you have an idea for an index and you wish to develop it to an investable index? This service allows you to examine your index with the conditions required to create investment vehicles that will track its performance, including index securities liquidity stress-tests and index performance back-testing. In addition, you can develop your own index through the Index Research platform and professional guidance.

The examinations and development processes are based on relevant laws and regulations in Israel as well as on relevant securities data, and also are based on the vast experience and the unique knowledge Index Research holds.

The following processes are carried out as part of this service:

Regulatory Conditions Examinations
  • Compliance with publication requirements for index levels, securities composition and weights
  • Compliance with publication requirements for index calculation method
  • Compliance with the index rebalancing frequency and publication of the changes
  • Compliance with the maximum weight of a single constitute in the index
  • Compliance with the maximum weight of a single corporation in the index
  • Compliance with the minimum constitutes that might be included in the index
  • Examining the type of securities defined in the index methodology and the procedures in special cases such as trading suspension, delisting proceedings, failure to submit financial reports, rating changes, tender offer, failure to payments of principal or interest, etc.
  • Compliance with the minimum market capitalization of a single constitute in the index
  • Compliance with the minimum float market capitalization percentage of a single constitute in the index
  • Compliance with the minimum market capitalization of all constitutes in the index
  • Compliance with the regulatory requirements for investment vehicles names
Liquidity Examinations
  • Examining the liquidity conditions defined in the index methodology and comparing them to accepted criteria in similar indices offered on both local and global capital markets
  • Examining the liquidity of securities included in the index based on a unique model developed by Index Research in order to test the trading capacity of index products
  • Performing stress tests to examine the potential failure points of securities liquidity in the index
Back Testing
  • Setting the desired measurement period (usually between one to five years)
  • Collecting market data required for the testing (including delisted securities)
  • Constructing the index constitutes for each historical rebalancing
  • Calculating the weights of securities included in the index during the measurement period
  • Calculating the index levels during the measurement period
  • Calculating historical market data for the index (number of constitutes, durations, yields to maturity, credit spreads, ratings, ratios)
  • Presenting the historical performance of the index (returns, standard deviations and Sharp ratios)
Methodology Document Review
  • Providing expert opinion on the index methodology
  • Writing guidance and proofreading of the index methodology

 

In addition to the processes described above, Index Research also offers a service called “Build your own Index” which allows users to develop their own index through the Index Research platform and professional guidance. This service will guide you from the index concept phase to the final construction of the index for the use of investment vehicles.

Would you wish to develop an index? Please contact us:

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