S&P Dow Jones Indices said it has revised rules for classifying stocks as growth
or value, adding intangible assets, expected earnings and free cash flow to
valuation assessments and removing 12‑month price momentum from growth metrics.
The changes, adopted after a recent consultation, will take effect at the annual
index reconstitution before market open on Dec. 21. The reclassification could
force index-tracking funds to rebalance to match new constituents; analyst James
Seifert estimates at least $375bn of passive assets are linked to affected
indices. S&P said the move responds to long-running questions over the
usefulness of traditional value measures; researchers and managers have pointed
to value’s long-term underperformance and flaws in metrics such as
price-to-book.