The Dow Jones Parala Macro Allocation Indices are first-of-their kind indices that utilize macroeconomic factors to make allocation decisions. The indices are based on a sophisticated macro allocation model developed by Parala Capital LLP that is backed by extensive academic research.
The formula behind Parala's macro allocation model starts with the Capital Asset Pricing Model and for each market expands on it to encompass additional beta risks such as style, size and momentum factors, as appropriate. The model then incorporates a set of macroeconomic factors that are determined to be most relevant to the represented market. Examples of the macro factors used in the model include inflation, interest rates, money supply and industrial production rates.
Each index within the Dow Jones Parala Macro Allocation Index series is constructed as an "index of indices," covering a defined set of countries or sectors within a specific market that correspond to assets evaluated by Parala's model. The macro-factor scores generated by Parala's model are used to determine the degree to which each underlying index will be over- or under-weighted relative to its float-adjusted market capitalization weighting.
Dow Jones Parala Global Sector Macro Allocation Index: Allocates among 19 global sector indices.
Dow Jones Parala Emerging Markets Sector Macro Allocation Index: Allocates among 10 emerging markets sector indices.
Dow Jones Parala U.S. Sector Macro Allocation Index: Allocates among 10 U.S. sector indices.