The SG Global Value Beta Index aims to track the performance of a global basket of listed shares which exhibit a positive value bias. The methodology consists of ranking stocks based on their global sector relative valuation metrics, as not only has this demonstrated better risk-adjusted returns, but it also makes more intuitive sense to compare companies within the same sector.
The stocks are chosen from a universe of global developed market companies with a free float market capitalization of US$1bn or more at today’s price, and where average daily volume has exceeded US$3mn over the past six months. Stocks are ranked relative to their sector peers on the basis of valuation. The value are calculated using the equal-weighted quintile score of a set of five traditional value factors, which have all been associated with positive returns in academic literature: Book to Price Factor, Earnings to Price Factor, One Year forward Earnings to Price Factor, EBITDA to Enterprise Value Factor, Free Cash Flow to Price Factor. After that the index consists of an equal-weighted basket of the cheapest 200 stocks based on the above value score.