Performance & Volatility
Last valuation date : 02-04-2020
Risk / Return from 03-01-2002
All information for an index prior to its Inception Date is back-tested, based on the methodology that was in effect on the Inception Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The key elements of the index methodology are available upon demand.
NXS Long Value Europe Equity Index is a dynamic strategy index with exposure to a basket of 50 European stocks selected from the STOXX® Europe 600 Total Return Index universe, based on their discount as reflected in a Value score.
The aim of the index is to allow investors to capture the upside potential offered by a number of so-called undervalued European stocks, with a view to outperforming the risk-adjusted return on the STOXX® Europe 600 Total Return Index.
To be included in the NXS Long Value Europe Equity Index, a stock must: be part of the STOXX® Europe 600 Index, have a market capitalisation of over EUR 1.5bn and show average liquidity over the preceding 6 months of over EUR 15mn a day in volume.
From the stocks that meet these criteria, 50 are selected that are deemed to be the most undervalued, i.e. with the highest Value score, and based on the following sector diversification: each of the 10 sectors of the ICB(1) classification is represented by at least one stock and no more than seven stocks.
The Value score is determined on the basis of the following three ratios: Earnings Yield: revenues per share/share price; Book to Market Ratio: book value of the share/share price; Free Cash-Flow Yield: free cash flow per share/share price. The value score for a stock is given using an equally-weighted average of its ranking calculated with each of the three ratios. The higher the ratios, the higher the Value score. The stocks in the basket are equally weighted daily and dividends are reinvested.
The Value risk premium is part of the Fama-French three-factor model (1992) to explain equity returns.
The “Value” approach stems from the observation that the price of a share can deviate from the intrinsic value of its company and from the fact that so-called “undervalued” shares historically offer higher returns than so-called “overvalued” shares.
Strategies invested in a “Value” approach offer attractive returns during economic recovery phases, as the economic context is therefore more favourable to undervalued companies to help them overcome their difficulties.