Are Equity Indexes The Next Media Fad?
By Journal of Indexes Staff

In a trend that was perhaps started by Wired magazine's Wired Index (see Indexes, Issue 1), which represents what its creators term the "new economy," two other media presences have taken it on themselves to develop indexes that represent the US economy.

Fortune magazine has announced that it has agreed to let the Chicago Mercantile Exchange offer futures and options based on indexes the magazine is creating.

The Fortune 500 Index is based on the annual Fortune list of the US's top 500 companies by revenues. It is market-capitalization weighted and excludes any stocks with share prices of less than $5, market capitalizations of less than $100 million and average daily trading volume of less than 100,000 shares.

The Fortune e-50 index is modeled on a list of leading Internet companies Fortune began publishing in December 1999 to provide yet another benchmark for Internet-related stocks. The e-50 is also weighted by market capitalization and includes online businesses as well as companies that are involved in Internet-related software, hardware and communications. Its top five companies are Intel, Cisco Systems, Microsoft, Oracle, and Yahoo!.

The CME filed for regulatory approval for derivatives based on the indexes in February.

The Motley Fool, an online Web site for investors, also decided to get in on the index action by launching the NOW 50 index. This index consists partly of companies nominated by the (Internet) publication's reader audience and is intended as a sort of new and improved Dow Jones Industrial Average for the global economy. Components were ultimately chosen for displaying noteworthy strength in such areas as global branding, strategic vision and technology. The initial list includes Enron, DaimlerChrysler,Cisco Systems, American International Group, Nokia, Schlumberger and Sun Microsystems - and Berkshire Hathaway's class B shares, which trade at about $1800.

The editors of The Motley Fool announced on their website their rejection of the S&P 500 and the DJIA, at least in part because of the asserted failure of those indexes to take into account the global economy. Of course, both the older indexes are designed to represent the world of large cap US companies. Even so, 16 of the companies in the Now 50 are included in the 30 stocks of the DJIA, and 38 of the 50 Motley companies - just over three quarters - are in the S&P500.