William F. Sharpe Awards

March 01, 2006

AwardsThe FTSE/RAFI indexes made a strong showing at the William F. Sharpe Indexing Achievement Awards, held at the 10th annual Super Bowl of Indexing at the Scottsdale Regency at Gainey Ranch in Scottsdale, Arizona, on December 5, 2005. The awards are sponsored by IndexUniverse.com and IMN.

The FTSE/RAFI Fundamental Index series won the award for most innovative benchmark index, and Research Affiliates (RAFI) founder Rob Arnott took home the award for best index-related research paper for his tome, "Fundamental Indexation," published in the March/April 2005 issue of the Financial Analysts Journal.

Claiming the other lead awards were the EasyETF GSCI Commodities Index exchange-traded fund (ETF), for most innovative index fund or ETF, and the Vanguard Vipers Options on the Chicago Board Options Exchange (CBOE) for most innovative index derivative.

This year's Super Bowl of Indexing featured the second annual awards ceremony honoring outstanding innovations in the index industry. The program was highlighted by the presentation of a lifetime achievement award to William F. Sharpe, Nobel Prize Laureate in Economics, who is generally recognized as the "father of indexing." Mr. Sharpe not only won the award, but the awards will now be named after him: Future honorees will be recipients of the William F. Sharpe Indexing Achievement Awards.

A lifetime achievement award was also presented posthumously to Nathan Most, who spent 19 years at the American Stock Exchange, during which time he designed and ran two futures exchanges and a number of derivatives-based stock indexes. Mr. Most is widely recognized as the inventor of the ETF. He designed the S&P Depository Receipts (SPDRs), which began trading in 1993, and consulted with Barclays Global Investors to assist in the development of the iShares program.

In addition to the lifetime achievement awards, the ceremony honored The New York State and Local Employees' Retirement System and the Police and Fire Retirement System with the Award for Plan Sponsor Innovation. The plan, with over $126 billion in assets, provides pension, death and disability benefits for New York state and local government employees.

A panel of industry experts sifted through the original nominations in each of the four "voted" categories, narrowing a group of deserving candidates to five finalists (by vote). These finalists were then submitted to a voting committee comprised of the world's leading academics in the field of indexing research, who chose the winners. The group of academic judges included:

•   Don Chance, Louisiana State University
•   David R. Gallagher, The University of New South Wales
•   John A. Haslem, University of Maryland
•   Burton G. Malkiel, Princeton University
•   William F. Sharpe, Stanford University Graduate School of Business
•   Robert J. Shiller, Yale University
•   Hans R. Stoll, Vanderbilt
•   Robert E. Whaley, Duke University

Best Paper

The judges awarded the best index-related research paper to " Fundamental Indexation" by Robert Arnott, Jason Hsu and Philip Moore of Research Affiliates, LLC. Arnott and his team beat out four other nominees, which were:

"Index Changes and Losses to Investors in S&P 500 and Russell 2000 Index Funds," by Honghui Chen, University of Central Florida, Gregory Noronha, University of Washington, Tacoma, and Vijay Singal, Virginia Tech;

"The Forecast Quality of CBOE Implied Volatility Indexes," by Charles J. Corrado, Massey University-Albany, Auckland, New Zealand, and Thomas W. Miller, Jr., St. Louis University;

"Class Consciousness Pays: Characteristics of Index Funds with Diverse Expense  Ratios," by John A. Haslem, University of Maryland, H. Kent Baker, American University, and David M. Smith, University at Albany, SUNY; and "Taking Issue with the Active vs. Passive Debate," by Craig Israelsen, Brigham Young University.

Most Innovative Indexing Derivative

The American Stock Exchange's options on Vanguard's VIPERs (Vanguard Index Participation Equity Receipts) ETFs won a hotly contested battle for most innovative index derivative. The options on 19 VIPERs ETFs began trading in September 2006, and cover Vanguard's full suite of sector, size and style funds. The VIPERs options beat out an array of finalists that included AMEX MERITS principal-protected structured products, Chicago Board Options Exchange (CBOE) options on SPDRs, CBOE Mini-SPX options and the Chicago Mercantile Exchange's ETF futures contracts.

Most Innovative Index Fund/ETF

The Easy ETF Goldman Sachs Commodity Index took home the award for most innovative index fund. This ETF represents the first successful launch of an ETF based on a broad index portfolio of commodities. Axa Investment Managers and BNP Paribas launched the ETF, which is based on the Goldman Sachs Commodity Index (GSCI), which tracks the performance of 24 commodities across four sectors (energy, metals, agriculture and livestock) by investing in futures contracts. Other finalists for the award included the streetTRACKS DJ Wilshire Size and Style ETFs, SPDRs Dividend Aristocrats ETF, iShares MSCI EAFE Growth and Value ETFs, iShares FTSE Xinhua ETF, and streetTRACKS Gold Shares.

Most Innovative Index

Another close contest was the award for most innovative benchmark index, won by the FTSE/Research Affiliates Fundamental Index (RAFI). The FTSE/RAFI Fundamental Indexes use an innovative approach to index weighting and construction, wherein constituent companies are selected and weighted using fundamental metrics of size-such as sales, cash flow, book value and dividends- rather than market capitalization. Other finalists included the FTSE/ASEAN index series, Standard & Poor's new Style and Pure Style indexes, the Russell Microcap Index, and the DJ STOXX Pan European Select Dividend.

 

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