Proprietary Indices

We could not find these indices elsewhere, so we built them ourselves

Long Term Bonds | Real Effective Exchange Rates | All Assets | Earnings Per Share | Global Styles & Sectors

 

 

 

 

Our indices are designed to fill gaps in the market for investment strategy, not to assess investment performance

Long-term EPS Indices for 51 countries and regions available here

Objectives

Investors RouteMap has developed a set of proprietary indexes, designed to analyse changes in price over time. These indexes are the basis on which quantitative recommendations are generated by the RouteMaps for making decisions about asset allocation and market timing by region, asset class (bonds / currencies / equities /alternatives) as well as equity investing styles. Long-term performance simulations are available.

Our Indexes have been built to achieve three objectives: -
  • To analyse historical patterns over as long a time-span as possible
  • To represent as broadly as possible the performance of global markets.
  • To provide a consist basis for generating Best Guesses on the outlook for markets

Historical time series have been created for the following types of data:

  • GDP Output Gaps
  • Real Effective Exchange Rate Indexes
  • Long Term Government Bond Indexes *
  • Regional Indices for all Asset Classes
  • Stock Market Indexes *
  • Style Investing Indexes
  • Earnings per Share Indexes

These indexes are not intended to be used as performance measurement for actual funds or portfolios. They are investment tools intended to provide a means of generating Best Guesses regarding the outlook for different markets in terms of direction and order of magnitude.


Our notional long-term government indices cover 30 countries and regions since 1966.

Long-Term Government Bond Indices for 28 Countries and 11 Regions available here

Long Term Bonds Indices

Government Bond indexes represent notional ten year sovereign prices denominated in local currencies as calculated from official yield statistics in order to make like-for-like investment comparisons across borders of instruments with similar risk and maturity characteristics. National bond indexes are weighted by GDP in international aggregates. This avoids the problem of indices weighted weighted by market capitalisation, which place greatest emphasis on the worst debtors and therefore also most likely defaulters. Comparable monthly historical time series have been calculated back to year-end 1966.

 


Our REER indices cover 29 currencies
 

Real Effective Exchange Rates Indices on 29 Currencies available here

 

Real Effective Exchange Rate Indices

For foreign currency, indexes of real effective exchange rates have been created based on movements in nominal exchange rates and changes in consumer price indexes as well as unit wage costs. These are weighted by the average of exports and imports to and from leading trading partners, and are rebased about once a decade. On average these partners represent around two thirds of trade for each country. The global benchmark is represented by IMF Special Drawing Rights (SDR). Users should note that data for early years in long time series may be liable to significant distortion owing to structural changes in economies and high levels of past inflation. Comparisons since 1980 with similarly calculated indexes produced by the IMF show an average divergence of only 0.4% per annum compound for 20 countries on which comparable data is available.

Our Asset Class Indices combine six asset classes in different regions

Regional and Global Indices for All Assets available here

All Assets Indices

These indexes show total returns on portfolios invested equally across six asset classes. These are Cash, Domestic Bonds, Foreign Bonds, Domestic Shares, Foreign Shares and Real Estate. The indexes are calculated monthly on the basis of continuous re-weighting and are intended to provide an average against which decisions on the comparative merits of each asset classes can be made. They are not intended as performance benchmarks. Indices for component asset classes are derived from our other regional indices which are in turn derived from leading national indexes in the constituent countries.    

 

Our EPS Indices cover 51 countries and regions in the Shares RouteMap

Our EPS Indices cover 3 investing styles and 8 economic sectors in the Styles RouteMap

See an example in the Chart Library

 

Earnings Per Share Indices

Earnings per Share time series have been derived from published PE ratios and broadly-based national stock market indexes to provide an estimate of current year EPS for the whole market. Appropriate lagging adjustments have been made. Regional and Global time series are created by weighting constituent country series by market capitalisation.

The regional and global averages are currently based on broad-based national stock market indexes that are produced by individual bourses or other sources for individual countries. To maintain consistency, wherever possible these are market capitalisation weighted, price-only indexes that exclude reinvested income. Other compatible indexes may be fitted to the currently used indexes so as to create longer runs of historical data.

This makes it possible to create long-term historical series of implied EPS back as far as 1966 for many developed countries and at least as far back as 1994 for all the countries analysed in the Shares RouteMap as well as most of the economic sectors and investing styles of the Styles RouteMap. Those in turn provide the basis for analysing past relationships between economic factors and company profits and between company profits and share prices.

This forms the basis for a top-down EPS Revisions strategy. Having established which economic variables explain EPS in the past and the weighting of each variable, Consensus Forecasts are then plugged into the EPS models to predict EPS for future years.

Even though economists are often wrong, the direction of their month by month revisions to these forecast EPS can be a useful indicator of future stock market performance - and one that avoids the frequently over-optimistic bottom-up bias of sell-side analysts and their contacts in the corporate sector, whose forecasting horizon is typically limited to the length of their order book. For further information on historic EPS indices see Earnings Per Share in the Chart Library and for forecast EPS see Forecasting Profits in Conceptual Framework > Investment Process.

In turn rolling four averages of these EPS series also provides the basis for a valuation strategy based on Cyclically-Adjusted PE Ratios in both Shares and Styles RouteMaps. 

NB. These indices are not intended for performance measurement, and forecasts are as fallible as the average economist. 

Our Style Indices are designed to analyse investment themes

Comparable indices on 11 economic sectors and investing styles in 6 regions available here



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Global Style & Sector Indices

These are intended to act as a barometer for changing fashions in stock market investment. As far as possible they are assembled from compatible national sources and represent price-only geometric averages of broad market trends. However to generate long historical time series near matches may be chained to the beginning of the current data series. All indexes are rebased at year end 1994 = 100 for comparability.