Standard & Poor’s has launched the S&P Factor Indices, which seek to measure the risk premium inherent between asset classes and financial markets, creating a means for investors to track the spread between a long and short sub-index. 

Each index in the series is comprised of an equal-weighted long and short sub-index calculated to reflect the corresponding spread.

The Long Sub-Index is comprised of long front futures contracts; the Short-Sub-Index is comprised of short front futures contracts.

The objective of each index in the series is to provide investors with exposure to the price difference between sub-indices, and in turn, the underlying futures contracts.

“The S&P Factor Index Series was built to provide investors with the ability to benchmark, or gain exposure to, a broad range of risk premium in the financial markets,” says Steve Goldin, vice president of strategy indices at S&P Indices.

The following factors are represented in the series: equity risk premium, which measures the spread of the US stocks over the returns of long-term government nonds; non-US dollar equity, which measures the spread of the return of US stocks over the return of the US Dollar Index; crude oil - equity spread, which measures the spread of the return of crude oil over the return of US stocks; and gold - equity spread, which measures the spread of the return of gold over the return of US stocks.