The newly minted Barron’s 400 Index will track the performance of highly liquid U.S. stocks, highlighting America’s most promising companies as defined by fundamentals-related rules-based criteria (fundamental analysis and rating of stocks is conducted by MarketGrader.com Corp., a research firm based in Coral Gables, Florida). Stocks must then pass additional rules-based screens applied by Dow Jones Indexes:
- Must have a minimum float-adjusted market capitalization of $250 million USD
- Must have reported quarterly or annual earnings results within six months prior to semi-annual reviews, and
- Must have traded an average of at least $2 million daily for the preceding three months.
Furthermore, at least 100 of the index’s 400 stocks must each have market capitalization of more than $3 billion USD.
The top 400 stocks that meet these criteria are selected as components of the Barron’s 400 Index. Components are equal weighted and industries are capped at 20% of the index to ensure diversification. Real estate investment trusts (REITs) are ineligible for inclusion.
Dow Jones Indexes intends to license the new index to underlie financial products such as mutual funds, exchange-traded funds and other investment vehicles.
As of August 31, 2007, the estimated Barron’s 400 Index, based on back-tested data, is up 221.04% since its inception on December 31, 1997, while the Dow Jones Wilshire 5000 is up 59.25% in the same time period, according to a press release.
The index is reviewed semi-annually in March and September. Estimated daily back-tested history is available back to December 31, 1997 (although back-tested performance information is purely hypothetical and does not represent actual performance). Index values will be published daily on the Dow Jones Indexes Web site (http://djindexes.com) and on Barron’s Online (http://www.barrons.com).