Sunday, January 3, 2010

Foreign Blend -- the calculation

the Foreign Blend is a hybrid of a price index and a market indicator. we start with a list of ETFs that have 'market capitalizations' of at least $50 million and an average volume of at least 50,000 shares a day. according the screener 195 ETFs meet these two standards. (view current list.)

41 of the above we can classify as 'International' stock index ETFs. (view current list.)

we then download that list with each symbol's market cap, average volume, and latest share price.

now we mulitiply the market cap column by the avg volume column, then square root the product, divide by 1000 and multiply by the current price to get each ETF's contibution. then we just add up the numbers for all the ETFs and we get the total value of the Foreign Blend.

so for 12/31/09 the Foreign Blend had a value of 7019. after the close of trading each day we repeat the process outlined above to get that day's value. (sounds like a hassle, but it should only take a few minutes each day.)

in another post I will explain more about the rationale and potential uses of the index.