Index evolution

It has brought devastation to almost every corner of the financial markets. But thanks to the financial crisis, it is boom time in the previously staid world of index research. Market turmoil has revealed limitations in relying on traditional indices for ETFs. Disenchantment is prompting a search for new benchmarks. “There is increasing evidence of big problems with cap weighted indices,” said Felix Goltz, head of applied research at the Nice-based Edhec-Risk Institute. “They were initially designed by stock exchanges to measure where the market is and not meant as a tool for long-term...