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Understanding CRSP index
4
Banding and Migration
Market Capitalization
http://www.crsp.com/indexes-pages/key-concept-3-banding-and-migration
Allowing a security split 50/50 between adjacent indexes.
Efficient Frontier
on Turnover and Style Impurity
Count based index: Not ideal for
- performance evaluation
- use in policy portfolios
http://www.crsp.com/indexes-pages/key-concept-3-banding-and-migration
CRSP's solution
Based on Cumulative Market Capitalization
Goal
Combining size benchmarks
from key concepts at CRSP.com
Combined Logic:
- Three tier: Mega + Mid + Small
- Two tier: Large + Small
where, Large=Mega+Mid
Increase Style Purity
If not
If an investor is implementing an asset
allocation with defined percentage, the lack
of purity keeps from correct allocation.
Minimize index turnover
If not
Small change across the line between
two categoies incur turnover which may
induce many transaction costs.
Banding and Migration
Multi-Factor Style Model
Gap between industry practice and current academic thinking
The Value and Growth dimensions are
defined using multiple factors
Characteristics of CRSP index
5 value factors
6 growth factor