An Index of All Things: Does Investing In Everything Make Sense?
As the exchange traded fund market continues to slice the investment world in to smaller and more targeted offerings, Warren Schmalenberger, current President and CEO of Dorchestor Capital Management Company, decided there was a need in creating an index that tracked everything.
His creation, the Capital Markets Index, CPMKTS, measures the capital markets on a consolidated basis viewing the capital markets on a broader basis by including stocks, bonds, and money market instruments. It satisfies the needs of both professional and lay investors for a measurement tool for mixed or blended portfolios and provides the basis for a wide variety of investment instruments.
The CPMKTS was created to meet the market's need for:
- More sophisticated measures of capital market performance.
- Improved measures of risk and return.
- Better tools to make asset-allocation and investment decisions.
Highlights of the CPMKTS index include:
- Comprises stocks, bonds, and money market instruments.
- Has documented demand from investment professionals and individual investors as a benchmark tool and as a basis for an investment product.
- Delivers capital market return for capital market risk.
- Replicates the capital market's actual asset allocation.
- No known competitors in measuring the broader capital market's performance.
Dorchester has spent six years collecting more than four terabytes of historical data–including government statistics and market changes an additional 200 million pieces of information added each day. The data is organized, processed and updated every 15 seconds. This statistical selection is intended to remove the subjectivity associated with other indexes while accurately representing the history, mix and behavior of the capital markets.
How the index is calculated:
- Real-time and historical data have been acquired from multiple financial and government sources.
- Data is organized, normalized and processed.
- Dorchester's CPMKTIG is formulated, using all the investment-grade capital market assets and allocations.
- CPMKTS is the real-time index representation of the entire investment-grade U.S. capital market as derived from CPMKTIG and calculated by Dorchester and the AMEX.
- The AMEX publishes CPMKTS and its component indexes on the “tape” every 15 seconds.
- The CPMKTS index is designed to be used to produce different investment, hedging and measurement vehicles.
Schmalenberger said that a global index is in the works, but that it might take a few years.
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