Wilshire Brings Out More Fine-Tuned Indexes

The rap on many stock indexes, in particular the much-vaunted S&P 500, is they don’t really represent the stock market they are supposed to track. Index provider Wilshire Advisors, which has highly criticized its competitors’ methodologies, just came out with two more indexes it says will be better-tailored to investors’ needs.

Most indexes haven’t kept pace with changes in the markets, such as the shrinking number of stocks, according to Mark Makepeace, Wilshire CEO. “They aren’t representative” of current markets, he says.

A standard complaint about the S&P 500 is that it lacks any small-cap stocks and gives too much influence to the most popular names—i.e., with the largest market values. The Russell indexes, which have much ballyhooed days when they add and subtract member companies, are criticized for making the affected stocks artificially expensive (if they are joining the index) or cheap (if leaving).

The chief Wilshire index, the Wilshire 5000, was launched in 1974 and is meant to cover all US stocks, even small caps and microcaps.

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The firm’s latest entrants to the field are aimed at allowing investors to gauge how factors such as quality, momentum, size, value, etc., play out in assessing stocks. The point of factor investing: to suss out which stocks might lead to the best returns.

Sponsored in conjunction with Britain’s Financial Times, the new pair of factor-based indexes—the FT Wilshire Pure Factor index series and the FT Wilshire Multi-Factor index series—will, in the words of their news release, let investors “implement factor allocation decisions without unintended exposures.” That is, without tipping off sharpies who could take advantage of a slew of new buy orders.

Over the last several months, Wilshire has introduced two additional indexes that follow digital assets and another that is composed of stocks in sync with the Paris climate accord.