Morningstar to Launch New Indexes


Morningstar, Inc., plans to launch 16 new indexes in 2002 based on the firm's Style Box methodology.

"Morningstar Indexes will provide a single, consistent framework for portfolio assembly and monitoring. Our indexes are designed as discrete building blocks that eliminate security and investment-style gaps or overlap," said Morningstar Managing Director Don Phillips.

Seven aggregate indexes will include:

  • Broad Market
  • Large, Mid and Small Capitalization
  • Value, Neutral and Growth Style

Nine component indexes will include:

  • Large Capitalization Value, Neutral and Growth
  • Mid Capitalization Value, Neutral and Growth
  • Small Capitalization Value, Neutral and Growth

Determination of which stocks fall under Value, Neutral and Growth will be calculated by formulas applying growth, projected earnings growth, historical earnings growth, cash flow growth, and book value growth, as well as value indicators including price-to-earnings, price-to-book, price-to-sales, price-to-cash flow, and dividend yield.

Rules will be transparent and objective. Capitalization will be free-float weighted to avoid high weightings of largely privately held firms (which investors cannot easily buy). So-called stability buffers will be in place to dampen turnover. .

The indexes will be licensed to financial services firms to create products and will be used in investor tools and reports.