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GEM Analysis of European Index Futures

categories: Factor and Risk Modeling, RMA, Derivatives, Research Paper, CAULDWELL Andrew, general

What happens when you compare the new indices to the established standards? The purpose of this article is to use  Barra's Global Equity Model to analyze newer indexes in relation to the more established indexes--not to suggest that one index is more suitable for European investment than another, but rather to highlight the differences in their characteristics. We'll perform three analyzes: The first analysis will compare the Eurotrack 100 index with the FT Europe (excluding U.K.) index, called the FTEXUK. The analysis will be carried out from a Deutschmark base as this is the currency in which the index is calculated.  The second analysis will focus on the Euro Top 100 against the FT Europe (including the U.K.) index, called the FTEUR. The Euro Top 100 is quoted in ECUs, but a Deutschmark  base has been used in this analysis, reflecting the Deutschmark's large weighting in the ECU. The third analysis will compare the Eurotrack 200 index to the FT Europe index. It will also detail the way the FTSE 100 and the Eurotrack are combined to form the composite index and determine whether there is a more efficient way of combining the two components to better capture the characteristics of the European market.