S&P Dow Jones Indices has adjusted the rules for dividing stocks into growth stocks and value stocks, and related index constituents may undergo major adjustments. According to a statement issued by the company on Friday, the new rules will include intangible assets, expected profits, and free cash flow as evaluation factors to determine whether a company's stock price is relatively undervalued. At the same time, indicators that measure the company's growth potential will no longer include stock price momentum over the past 12 months. This adjustment was made after a recent consultation, and will officially take effect during the annual index restructuring before the market opens on December 21. The new regulations may force funds tracking the relevant indices to adjust their positions to match the new list of constituent stocks. Industry research analyst James Sefat estimates that at least $375 billion of passive fund funding is linked to the affected indices. This adjustment by S&P stemmed from a long debate in the market over whether traditional value stock valuation indicators are still valid. Researchers and fund managers believe that the long-term sluggish performance of value stocks is partly due to flaws in existing measurement standards, particularly the net market ratio.

S&P Dow Jones Indices has adjusted the rules for dividing stocks into growth stocks and value stocks, and related index constituents may undergo major adjustments. According to a statement issued by the company on Friday, the new rules will include intangible assets, expected profits, and free cash flow as evaluation factors to determine whether a company's stock price is relatively undervalued. At the same time, indicators that measure the company's growth potential will no longer include stock price momentum over the past 12 months. This adjustment was made after a recent consultation and will officially take effect during the annual index restructuring before the market opens on December 21. The new regulations may force funds tracking the relevant indices to adjust their positions to match the new list of constituent stocks. Industry research analyst James Sefat estimates that at least $375 billion of passive fund funding is linked to the affected indices. This adjustment by S&P stemmed from a long debate in the market over whether traditional value stock valuation indicators are still valid. Researchers and fund managers believe that the long-term sluggish performance of value stocks is partly due to flaws in existing measurement standards, particularly the net market ratio.