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S&P 500 Asset Class question
Old 12-30-2003, 07:36 AM   #1
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S&P 500 Asset Class question

The Vanguard fund VINIX which is where my wife's 401K is invested in, basically is a S&P 500 index fund. My question is that it has an asset class of 'Blend'. Which is a mixture of Growth and Value Stocks.

Does anyone know the rough percentages of Growth and Value that the S&P 500 makes up.

Such as - Growth 80% - Value 20% ??
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Re: S&P 500 Asset Class question
Old 12-30-2003, 08:54 AM   #2
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Re: S&P 500 Asset Class question

Depends on who is determining what a growth stock is and what a value stock is.

This factor also changes daily as the stock prices wander in and out of whatever calculation has been employed.

This is somewhat like asking "how many fish can I fit in a barrel". Depends on the fish and the barrel

If you go by Barra's definition, and thats a good one, there are slightly more value stocks than growth stocks as of the last time they rebalanced their s&p growth and s&p value indices. I would bet that has changed with the recent run up, which has made some value stocks growth oriented.

If i recall correctly, during the big market runup in the late 90's, the index was dominated by growth.

Barra tries to draw a line down the middle, although there is always somewhat more in one bucket than another since their measurement is relative. Russell even splits stocks, saying that some stocks are "70% growth and 30% value" based on several criteria, putting the same stock in both value and growth indices in different weightings.

I note that vanguard has slightly more than 400 entries in both their growth and value indices. Without looking, I'm going to guess that they've got a nice overlap there with a different weighting. Hence there are somewhat less than 100 "true" growth stocks represented and somewhat less than 100 "true" value stocks represented from the s&p 500.

This is what Barra says:

"The S&P 500/Barra Growth and Value Indexes are each designed to be comprised of approximately 50 percent of the S&P 500 market capitalization. This 50/50 percentage weighting is only approximate, because it is usually not possible to divide the S&P 500 Index into two halves of identical market capitalization. Moreover, the relative weights of the Growth and Value Indexes drift away from 50/50 during the months following each rebalance as a result of changes in the relative market capitalization of their constituent companies, so they must be moved back to roughly 50/50 again during each subsequent semiannual rebalance.

During the rebalancing, the S&P 500 Index members are sorted in decreasing order by their corresponding Barra Book-to-Price risk index factor exposure. Companies are then selected in decreasing order by their Barra Book-to-Price exposure for placement into the newly-rebalanced Value Index. Concurrently, a running tally of the total market capitalization is maintained for each individual S&P 500 Index company selected in this manner.

Those companies that have been selected according to this method are allowed to enter the S&P 500/Barra Value Index only as long as this running tally of total market capitalization remains strictly less than 50 percent of that of the S&P 500 Index. Otherwise, the company under consideration is placed into the newly rebalanced S&P 500/Barra Growth Index. In addition, all S&P 500 Index companies that have not yet been selected for placement into the Value Index are assigned to the Growth Index. Consequently, the sum of the market capitalization of all companies that have been placed into the S&P 500/Barra Value (Growth) Index cannot exceed (be less than) 50% of that of the S&P 500 Index as of each May 31 and November 30 semiannual rebalance.

As of the semiannual rebalance, any company in the Value Index has a Barra Book-to-Price risk index factor exposure which is greater than that of any Growth Index company. However, because the relative rankings of the Growth and Value Index company Book-to-Price risk index factor exposures may drift significantly during the months following each rebalance as a result of changes in the Book-to-Price ratios of the Index constituents, it is possible for Book-to-Price risk index factor exposures of many Growth Index companies to exceed those of Value Index companies. The S&P 500/Barra Indexes are then reconstituted as a result of each subsequent semiannual rebalance so that the Value Index constituent Book-to-Price risk index factor exposures are greater than those of the Growth Index.

Occasionally, the Book-to-Price exposure corresponding to two or more S&P 500 Index companies may be identical as of a given semiannual rebalance date. When this occurs, the semiannual rebalance procedure is modified slightly by the addition of a random stock selection process as a tie breaker. Using this methodology, stocks having identical Barra Book-to-Price risk index factor exposures are selected for random placement into the newly rebalanced Value Index. Stocks are selected using this tie-breaking method only after the selection of those S&P 500 Index members with Barra Book-to-Price exposures greater than that of the ties. When such ties exist, it is possible for the Book-to-Price exposure of the company in the Value Index having the lowest exposure to be identical to that of the Growth Index company which has the highest Book-to-Price exposure. However, it should be noted that this need not occur in every instance of Book-to-Price exposure ties. "
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