Weekly Reputation Index Metrics

The RepuStars® Variety Corporate Reputation Index calculated by Dow Jones Indexes launched into widespread distribution on November 1, 2011. Previously calculated on a proprietary basis and available only on the Mission Intangible blog of the Society, it is the first-ever composite equity index based on a quantitative strategy exploiting discrepancies between Steel City Re corporate reputation metrics and share price. The RepuStars Variety Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR.  Click here for real time quotes.

Analysis

The equity returns pattern continue to show a flight to quality and overall loss of risk appetite. According to Bloomberg, U.S. stock mutual funds that invested in domestic equities had their second-biggest redemptions last year as record market swings sent investors to the perceived safety of bond funds.

Investors pulled an estimated $132 billion from mutual funds that invest in U.S. stocks, the fifth straight year of withdrawals for domestic funds.

“Investors just can’t bear the pain, which sets the stages for an unwillingness to take risk,” said Christopher Blum, chief investment officer for behavioral finance at JPMorgan Asset Management in New York.

RepuStars Variety is a quantitative arbitrage strategy that assumes equity investors will discover what other stakeholders already know about a company’s prospects. In a risk averse environment, it appears, equity investors are less keen to discover.

Weekly Update

At the close of trading Jan 13, 2012, REPUVART and REPUVAR stood at 2545.90 and 2215.22 respectively. Over the past four weeks, the former has changed by 3.92%, while the latter has changed by 3.86%. The benchmark S&P500 Composite Index stood at 1122.82 (31 Dec 2001=1000) and has changed over the past four weeks by 5.69%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by -1.74% and -3.01% respectively; the S&P500 Composite Index has changed by -0.32%. Since January 2009, the REPUVART and REPUVAR have changed by 103.46% and 92.89% respectively; the S&P 500 Composite Index has changed by 38.34%. Other interval changes in the magnitude of the indices are shown below.

Background

The RepuStars Variety Corporate Reputation Index is the first index based on a quantitative model for analysts, investors, and company managers to determine the actual impact of reputation on corporate equity prices. The companies selected for the RepuStars Variety Index are chosen algorithmically to capture the disparity between value at which a company is currently trading and its value as calculated by Steel City Re’s reputational metrics.

The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to their metrics as measured by Steel City Re’s proprietary Corporate Reputation Index™, which tracks 5500 companies weekly. In using the RepuStars Index as an investment strategy, investors can take advantage of this price disparity. The principles behind Steel City Re's reputation metrics are discussed in the book, Mission:Intangible (see below).

The RepuStars indices are reconstituted annually in the first week of January. The Indices were last reconstituted 6 Jan 2011.  Click here for additional information on the index.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers. 
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow.

Notices

STEEL CITY RE and REPUSTARS are registered trademarks of C. Huygens & Co. LLC and are used under license. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes. The RepuStars Variety Corporate Reputation Indexes are calculated by Dow Jones Indexes, the marketing name and the licensed trademark of CME Index Services, LLC. (CME Indexes). Dow Jones Indexes is a service mark of Dow Jones Trademark Holdings LLC. (Dow Jones). Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones or their respective affiliates, and CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of investing in such product(s).