Index provider FTSE Group and the EDHEC-Risk Institute are collaborating to launch a new index series.

The FTSE EDHEC-Risk efficient index series will take as its base the FTSE All World equity indices. Index constituents will be weighted by their Sharpe ratio rather than by the traditional method of market capitalisation.

The Sharpe ratio is a measure of excess return per unit of risk, with risk defined as the standard deviation (volatility) of returns.

Professor Noël Amenc, Director of the EDHEC-Risk Institute, said: “The methodology minimises excessive concentration of risk and affords investors the ability to benefit from the maximum Sharpe ratio portfolio. This simple concept is primarily based on the concept of a positive and robust long-term relationship between the risk of a stock and its return and we are pleased to have partnered with FTSE Group, an authority in the field of indexing, to achieve this within an innovative index series.”

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