The FTSE/ATHEX Factor-Weighted Index (FTSEMSFW) is a specialised equity index developed by the Athens Stock Exchange (ATHEX) in cooperation with FTSE Russell, designed to apply a factor-based weighting methodology to a selected basket of Greek-listed stocks. Unlike traditional market capitalisation-weighted indices that assign weight purely based on company size and float, the FTSEMSFW introduces quantitative investment factors into its construction, reflecting broader shifts in institutional portfolio management strategies that increasingly favour smart beta or factor investing models.
The index blends characteristics such as momentum, value, volatility, and liquidity to produce an alternative weighting of stocks that may enhance diversification, reduce concentration risk, and potentially improve long-term risk-adjusted returns. It is the first of its kind within the Greek market and forms part of a wider effort to align local financial infrastructure with international index innovation trends.
Purpose and Development Context
The FTSEMSFW was created to give the Greek market a benchmark aligned with global developments in factor-based investing. As institutional investors, pension funds, and asset managers across Europe moved beyond simple market cap weighting into factor tilts—seeking exposure to quality, low volatility, or value—the Athens Stock Exchange sought to offer a domestic product that reflects those approaches.
In practical terms, this index serves both as a performance benchmark for portfolios using factor screens and as a tool for product development, such as ETFs, structured products, or custom asset management strategies. It also supports broader market transparency by making factor-driven investment frameworks more visible and accessible to both domestic and foreign investors in Greece.
Index Construction and Methodology
The FTSEMSFW begins with a universe of stocks listed on the ATHEX main market that meet minimum thresholds for liquidity, market capitalisation, and reporting transparency. The selection pool overlaps heavily with the constituents of the FTSE/ATHEX Large Cap and Mid Cap indices, though inclusion is ultimately determined by factor scoring, not size alone.
The index applies a multi-factor model, incorporating several quantitative attributes that are commonly used in academic and institutional settings. These include:
- Value: Assessed using ratios such as price-to-book or price-to-earnings.
- Momentum: Based on relative price performance over defined periods (e.g., 6–12 months).
- Volatility: Favouring stocks with more stable historical price behaviour.
- Liquidity: Ensuring sufficient tradability to support practical investment.
Each stock is scored based on these factors, and the overall weighting in the index is derived from a combined factor score rather than its float-adjusted market capitalisation. This creates a non-linear weighting structure, meaning smaller companies may carry larger weights if they rank highly on the factor composite, while larger companies with poor factor characteristics may have lower influence.
Rebalancing and Reviews
The FTSEMSFW undergoes quarterly rebalancing, in line with global standards for smart beta indices. During each review, stocks are re-evaluated against the factor model, and their weights are adjusted accordingly. Additions and removals occur when a company’s factor profile deteriorates below the inclusion threshold or improves significantly enough to meet it.
All methodology decisions are transparent and publicly available. The index adheres to FTSE Russell’s global governance framework, which includes oversight from technical committees and periodic reviews to ensure methodological integrity.
Performance Dynamics and Use Cases
By construction, the FTSEMSFW tends to behave differently from pure market cap-weighted indices. During periods where high-momentum or low-volatility stocks outperform, the index may exceed the returns of the FTSE/ATHEX 25 or Composite Index. Conversely, when factor premiums reverse or specific sectors dominate market returns (e.g., banking or energy), the FTSEMSFW may lag traditional benchmarks.
The performance characteristics of the index make it appealing to investors seeking alternative risk exposures, particularly those interested in factor tilts without full active management. It can be used as a benchmark for domestic smart beta funds, as a model for passive investment vehicles, or as a building block within multi-strategy asset allocation.
The index is especially relevant for institutional investors with mandates tied to ESG or quantitative strategies, as it reduces size bias and allows more nuanced control over portfolio characteristics. It also supports diversification by lowering the concentration risk often present in cap-weighted indices—particularly in the Greek market, where a handful of financial and energy stocks can dominate index movement.
Availability and Market Penetration
As of 2025, there are limited financial products directly tracking the FTSEMSFW, though its development is seen as a precursor to further smart beta integration in Greece. The index is calculated in real-time during trading hours and is available via ATHEX’s market data services and selected global data vendors.
While not yet a mainstream benchmark, it is gaining attention among local asset managers and quantitative strategists seeking to build Greek equity strategies that mirror global investing patterns. It is also being studied as a case example in the application of factor investing in smaller, less liquid markets.
Limitations and Considerations
Despite its technical strengths, the FTSEMSFW faces challenges common to all factor-based indices, particularly in smaller markets like Greece. Factor crowding, thin liquidity in some high-scoring stocks, and periodic underperformance during regime shifts can all limit short-term investor adoption. Additionally, factor scores rely heavily on historical data, which may not always capture forward-looking changes in company fundamentals or market structure.
There is also the practical issue of implementation friction. Institutional portfolios replicating the index must contend with trade execution costs, wide bid-ask spreads, and sometimes limited float—especially if the index allocates more weight to smaller, less traded firms.