US - Dow Jones Indexes has launched the Dow Jones Select MicroCap Index to track the performance of US microcap companies listed on the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and Nasdaq.
The index currently consists of 281 stocks and was created to provide market participants with an accurate and reliable measure of the US microcap segment.
The index has been licensed to First Trust Advisors L.P. as the underlying for an upcoming exchange traded fund (ETF).
The ETF now enables investors to participate in the performance of microcap stocks.
“Microcap stocks perform very differently from larger stocks, and have yielded even greater rewards in recent years,” said Michael A. Petronella, president, Dow Jones Indexes/Ventures.
“The Dow Jones Select MicroCap Index follows a superior methodology, which eliminates problems usually associated with this category—such as illiquid financially instable stocks.”
The initial stock selection pool is determined by ranking all NYSE stocks by full-market capitalisation into 10 equal-numbered deciles, with deciles nine and 10 defining the microcap size range.
Issues then are added from the AMEX and Nasdaq exchanges that fit this size range.
The next step is a screening of this universe by market capitalisation and trading liquidity screens, followed by applying further fundamental screens such as price/earnings ratio, price/sales ratio, profit change, operating margin and performance return screens.
The Dow Jones Select MicroCap Index will be reviewed annually each September.
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