IIA Releases New Research: “Measuring Markets: The Origins and Benefits of Indexes”

Co-authored by IIA CEO Kirsten Wegner and Adjunct Professor John Jacobs of Georgetown University’s McDonough School of Business, the report explores the evolution, functions, and future of financial indexes as tools not only for benchmarking, but for investment decision-making, and as statistical measurements in an era of rapid technological change.

 

Notable highlights include:

  • The Role of Indexes – Indexes are a statistical measurement from independent firms, designed to track the performance of predefined groups or sectors of assets like stocks, bonds, fixed income and commodities. This data is commonly used by investment management firms to create investment vehicles like ETFs and mutual funds as well as for benchmarking, research and as economic indicators.
  • Benefits of Indexes – Indexes offer a range of valuable benefits, including: 1) enhanced transparency and independence in measuring units of assets; 2) endless choice and innovation for diversification of strategies; and 3) significant cost efficiencies for institutional and individual investors for investment vehicles tied to an index.
  • The Value of Data – Using advanced models and data science, indexes capture the complexities of new asset classes and industries, offering investors and the financial ecosystem data in an increasingly intricate financial landscape. Data quality is a core responsibility for index providers as the demand for comprehensive and accurate data continues to grow as index adoption grows.
  • Emerging Key Trends – The report identifies six key trends shaping the index industry globally, including: the use of artificial intelligence for index construction, management and customization; the growing use of derivatives to hedge risk and manage volatility; and the growing demand for tailored, thematic indexes such as emerging markets indexes.
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