Finance, News

S&P Dow Jones, University of Miami collaboration to create index for Florida

What began as an idea to come up with some sort of composite index for Florida has turned into a UM collaboration with S&P Dow Jones to calculate a Florida 50 index.

Deemed the “University of Miami’s Florida 50 Index” and available under the ticker UMIAMIFL, the index measures the performance of companies within the S&P 1500 Index whose corporate headquarters are domiciled in Florida. These companies include NextEra Energy (FPL), CSX Transportation, Carnival Cruise Line and Royal Caribbean Cruise Line.

“The establishment of the University of Miami’s Florida 50 Index, the first index of its kind to be owned by a university, illustrates our commitment to producing knowledge that can have a positive impact on the wider community,” said Gene Anderson, dean of UM’s School of Business Administration. “By gauging and regularly reporting on the performance of the top corporations in Florida, we will provide new insight that we believe will be valuable and of significant interest to businesses, policymakers and individuals statewide and beyond.”

Seth Levine, an accounting professor in the School of Business Administration, had the idea for several years and became more interested in making the index happen within the last two years.

“I said to myself, well why doesn’t somebody figure out a way to get like a composite, or like a group of all those [companies]and then create an index that would be like a pulse of the South Florida economy?” said Levine.

He explained that in the world of Exchange-Traded Funds (ETF), one could invest in a country and bet on the nation’s performance in terms of its economy. This led to the idea of having an ETF set up for a state’s economy. Through his research, he found out that about five years ago there was an attempt at creating an ETF for Texas and Oklahoma, but it didn’t work. Then Levine came upon an ETF that was based off Nashville, Tennessee. Since this was accomplished for a city, Levine was sure that it could be done for the State of Florida.

In order to have this ETF made for Florida, the first step was to create an index. That is where the S&P Dow Jones Indices stepped in, as they are the ones who were selected by the School of Business Administration to be the custom calculation agent for this new custom hybrid index.

“We are excited to be the chosen as the calculation agent for the University of Miami. By expanding our custom hybrid indexing capabilities beyond financial services, S&P [Dow Jones Indices] is able to provide the academic community with benchmarks tailored to their unique needs,” said Michael Mell, director of Custom Indices at S&P Dow Jones Indices.

According to Levine, the goal is to make this both an investable index and a teaching tool for students learning about investing. He said that if this index had existed 12 years ago and people had invested in it as an ETF, then they, the investors, would have come out on top.

“This index has done better than the whole composite (S&P 1500) going back 12 years, which is as long as we have history on it,” Levin said. “So Florida has beaten the index going back 12 years.”

Levine hopes that this inspires other colleges like Harvard to have an index for Massachusetts or New York University to have an index for the State of New York. To have investing opportunities for different states based off their performance would be the dream, he said.

Feature photo courtesy Pixabay user PublicDomainPictures.

January 27, 2016

Reporters

Jorge Chabo


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