Equity Style Indicies discusses, because, category, interested, contrast

Viceroy

SS11 LOS J discusses the process to compare and contrast the methodologies to construct
equity style indicies. Is this to assess the style the manager is pursuing?

I am okay up to the point that says the index could be constructed as either value or growth but what is the significance of a third neutral category? Also why does an overlap come in? Is this because the stock category cannot clearly be established as growth or value? Why would a manager be interested in an index with an overlap?

Some help please.

strikethree

Are you using an old text book? LOS statement from my textbook states that:

LOS32j. compare and contrast the methodologies used to construct equity style indices;

There is no 'process' nor 'discuss' in the LOS! Makes a world of difference!

Also the LOS states nothing about why a manager wants an overlap index or category. So don't bother about the manager part!

Just memorise that some index provider would categorise a stock either a growth or value while others would permit an overlap.

ohai

Russell Indices are an example where overlap occurs.

Since 1995 , they began allowing stocks to be members of both Large Growth AND Large Value , or Small growth AND Small value