NEW YORK (December 21, 2010) - Dow Jones Indexes, a leading global index provider, announced today a new country classification system that will apply to all countries covered in its major index families. The implementation of the new system will begin in March of 2011.
“Assessing the practical considerations within country markets is a primary focus of the classification process,” said Michael A. Petronella, president, Dow Jones Indexes. “This new country classification system strikes the appropriate balance between a rules-based methodology and the subjective guidance of our highly experienced Index Oversight Team,” he added.
All countries included in the indexes will be researched individually and assessed according to a pre-defined framework built around the needs of international portfolio investors in three broad categories: market and regulatory structure, trading environment and operational efficiency.
Assessments of the countries will be monitored on an ongoing basis, and include quantitative and qualitative elements leveraging internal and external resources.
The assessments will be used to produce a country classification assignment1 including: Developed Markets, the most accessible to and supportive of foreign investors with a high degree of consistency across these markets; Emerging Markets, which generally have less accessibility relative to developed markets, but demonstrate a level of openness, and Frontier Markets, which are typically much less accessible to foreign investors, exhibit notable limitations in their regulatory and operational environments, and support a smaller investment landscape. Frontier Markets tend to be much less robust and in the earlier stages of development (the prior country classification system did not offer a “Frontier” assignment).
The assignments will be formally reassessed each year in June by the Dow Jones Index Oversight Committee (IOC), which will make the final classification assignment decision for each country. The IOC may base their decision on the assessments or any other information that they consider to be relevant. A public announcement of classification changes, if any, will be made in September of each year. Classification changes will occur with a minimum of six months notice.
The new country classification system will be rolled out in stages to the full suite of Dow Jones indexes beginning with the March 2011 review. The transition of each index or index family from the old country classification system to the new country classification system will be announced individually.
Extraordinary Reclassifications: The IOC will re-visit a country classification on an as-needed basis if there is a material change in any of the assessments. If the IOC deems that a classification change is warranted, Dow Jones Indexes will provide a minimum of 90 days notice before a reclassification is implemented. Such changes will be implemented with the regular quarterly index review schedule (i.e.: following the third Friday in March, June, September or December).
For further information on Dow Jones Indexes please visit http://www.djindexes.com.
1The classification will not be strictly rules-based, i.e., a country will not have to necessarily “pass” a set number of criteria to earn a certain status.