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Topic Title: Has anyone tried to create a large market index
Created On Sat Apr 10, 10 07:24 AM
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thusi
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Sat Apr 10, 10 07:24 AM
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Hi
Has any one tried to create large market index (Say an index around 7 thousand companies in multiple countries) using Reuters/Bloomberg Data?


Thanks

Thusitha

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thusi
 
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winstontj
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Sat Apr 10, 10 03:50 PM
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That is VERY large and has MANY challenges. I have worked on much smaller domestic US indexes and optimization.

Would you use ADRs? The price dislocation across that many markets would make it very hard to price. Also currency exchange rates would be brutal.

ETFs based on the Russell 2000 are usually optimized down to 700-800 in the baskets for a few reasons - liquidity and trading/execution cost are the largest factors in my experience.

Would you be partnering with an index provider or is this prop/hedge fund related? You might want to talk to Wilshire Re: Wilshire 5000 but even that is only US based. You can create (manually) any index you want in Bloomberg (not sure if they can go 7000 constituents though) and you can ask for Bloomberg to create you a custom dummy CUSIP and you can make your Index public at the firm association level (your company only) or to firm plus other affiliates or to the general public.
 
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thusi
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Sat Apr 10, 10 04:11 PM
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What we are trying to build is a large world wide index. One of the Reuters products has a similar indexed (around 5000 constituents). We are trying to replicate that index. The problem is the constituents in this index has ISIN number as the primary key. To get the tick history data we need the Reuters RIC code for the given ISIN. But there is no one to one mapping between the RICS and the ISIN (One ISIN number can have multiple RICS).

So I am wondering whether there is an easy way to build something like this.

Regarding multiple countries, we are going to use FX rates to convert every thing to US dollars.

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Traden4Alpha
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Sat Apr 10, 10 04:15 PM
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Besides the issues mentioned by winstontj, you'll also want to think about all the events that require some type of price adjustment in the index calculations.

With that many components, you'll have a high number of turnover and price-adjustment events.
You will need a staff to track all events such as dividends, splits, M&A, privatizations, bankruptcies, moves across exchanges, symbol changes, withdrawn companies, etc. My quick guess is that you will see about a dozen of these events per day. This implies tracking the news on 7,000 components to watch for announcements of these events.

You'll also need to define a regular process for updating the index with companies coming into or going out of public trading.

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"It often happens that a player carries out a deep and complicated calculation, but fails to spot something elementary right at the first move." -- grandmaster Alexander Kotov --inscribed on gift chess sets given by Amaranth hedge fund.
 
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winstontj
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Sat Apr 10, 10 04:36 PM
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Quote

Originally posted by: thusi
What we are trying to build is a large world wide index. One of the Reuters products has a similar indexed (around 5000 constituents). We are trying to replicate that index. The problem is the constituents in this index has ISIN number as the primary key. To get the tick history data we need the Reuters RIC code for the given ISIN. But there is no one to one mapping between the RICS and the ISIN (One ISIN number can have multiple RICS).

So I am wondering whether there is an easy way to build something like this.

Regarding multiple countries, we are going to use FX rates to convert every thing to US dollars.


Do you have a bloomberg terminal? Bloomberg will allow you to convert ISIN over to CUSIP/Ticker. I don't use Reuters so I'm not sure what RIC code is - but I should hope that if you pay for Reuters data they would give that to you? I pay for Russell and S&P data and they provide me with everything (CUSIP, Ticker, Exchange, ISIN, etc.) via an FTP site daily. Do you pay for the index data? It might be worth it to either request a sample file or a trial period - or just pay for it. PM/Email me if you want me to send you a sample of what I'm talking about.

Also, are you trying to replicate and expand (Reuters 5000 ---> Custom 7000) or just replicate the 5000 stock index?

Cheers.
 
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