Performance & Volatility
Last valuation date : 18-07-2019
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.
The NXS Small Cap Europe Equity index is a dynamic strategy index with exposure to a basket of 50 European stocks selected on the basis of their low market capitalisations.
The aim of the index is to tap into the potential growth that may be offered by some Small Caps stocks, with a view to outperform the risk-adjusted return of the STOXX® Europe 600 Total Return index.
To be included in the NXS Small Cap Europe Equity index, a stock must:
– be part of the STOXX® 600 Europe index;
– have a market capitalisation of over €1.5bn;
– show average liquidity over the preceding 6 months of over €15m a day in volume.
From the stocks that meet these criteria, 50 are selected with the lowest capitalisations, based on the following sector diversification: each of the 10 sectors of the ICB2 classification is represented by at least one stock and no more than 7 stocks.
The stocks comprising the NXS Small Cap Europe Equity index are reallocated on a daily basis in such a way that the stocks are equally weighted. The dividends paid on the stocks comprising the index are reinvested.
The Small Caps risk premium is part of the Fama-French three-factor model (1992) to explain equity returns.
The approach involves taking advantage of a risk premium related to smallscale companies, which results from the fact that these companies are naturally riskier as they have uncertain revenues, fewer financial resources and pose a greater default risk in times of crisis.
Small Caps have outperformed Large Caps over the long term to offset this risk or in the wake of announcements or acquisition rumours. Small Cap factor also strongly benefits from recovery markets. An investment in Small Caps also offers a source of diversification as these stocks are less correlated to the equity markets in relation to large caps companies.