Prototyping Global Education Stock Indices
Experimental Market Cap weighted Geographic and Sector Indices
We've been prototyping sector and geography based education stock indices with the new Analytics Studio on the HolonIQ Global Intelligence Platform. Let's dive into one of the first prototypes...
Education is a $6T+ industry growing to $10T by 2030.
First up, let's set the scene. Clients and Weekly Newsletter Subscribers will recognize the two charts below from our very popular and overdue for an update, 10 Charts that explain Education Technology.
Expenditure on education and training from governments, parents, individuals and corporates continues to grow to historic levels and is expected to reach USD$10T by 2030.
Source: HolonIQ
Education is starved of capital compared with peer sectors.
Innovation requires capital. Governments were struggling to fund education before COVID19, let alone now and over this next decade. Education needs to explore new models to attract private capital to fund the innovation that's needed. Public-Private Partnerships will be critical to supporting future growth, innovation and access to education.
Source: HolonIQ, World Health Organization, Goldman Sachs, Standard & Poors. Note all figures pre COVID-19.
There are over 250+ Global Education Stocks. From Pre K through K12 and Higher Education to Workforce, these companies hail from Asia, the Americas, Europe, Africa and Oceania and support students, schools and colleges across the learning journey. We have been tracking each and every stock and the 60+ Global Education IPOs over the last four years and with the launch of our Analytics Studio, we are now experimenting with market cap weighted Indices that group stocks into segments based on their primary sector and home geography (with various threshold limits to control the influence of the mega education stocks on each index). Indices allow our customers to gain insight into the performance of certain segments and geographies based on various categories
Please note these are strictly experimental and research-based indices developed to provide our clients with deeper insight into various market perspectives around the world. Each index in the prototypes below is market-cap weighted with a maximum exposure threshold of 20% to support smaller baskets such as India and other groups with smaller numbers of stocks (Minimum index size is 11 consituents, maximum is 78). 20% is quite a large exposure threshold obviously and as such these prototypes are more heavily influenced by larger constituents. Further research and development will be conducted to build robust indices for client research purposes, balancing performance, risk and other considerations.
The four sector-based prototype Indices share a fascinating insight into the broad impact of COVID-19 from Pre K to Workforce. The rightmost shaded area of the chart captures the period when stock markets around the world decreased quite significantly. Note the different rebounds however. K12 and Higher Education both appear to have recovered half of the initial decline, Workforce less so and Pre K a shallower recovery underway again.
As we will see in the Geographic Indices below, the K12 index here is heavily influenced by Chinese K12 stocks and the shaded zone in the centre of the chart follows significant negative regulatory events in that market. The end of that shaded zone marks the start of a rebound at the end of 2018, marking the worst year in many stock markets around the world (at that time) since the financial crisis. Fears of an economic slowdown and uncertainty over US-China trade relations
All sectors grew into 2019, again Pre K lagging behind peer sectors in growth rate. We cannot stress enough that these indices are early prototypes and are heavily influenced by larger stocks in each index.
In total we track over 250 stocks listed on 20+ exchanges, however this prototype index analysis takes a smaller sample across six major economies. The Geographic Indices track the home market of each company, not necessarily the stock exchange they are listed on. For example, a Chinese stock listed on the NYSE is classified as Chinese to capture the underlying demand the company addresses.
The adverse K12 regulatory changes starting early-mid 2018 at the start of the center highlight period are much more obvious on the China Index shown in purple here as China has many K12 constituents. The US index however is more heavily weighted towards Higher Education. Japan is again more heavily K12 weighted and Europe comprising a larger number of publishers from across the continent. India and Australia have a smaller number of constituents and as such in this prototype moving with large players for example, in Australia a large Pre K stock has a big influence offsetting a big Higher Education stock and a tail of smaller constituents.
If tracking global education stocks is of interest to you and your team, request a demo below and we will be in touch.
HolonIQ is the world's smartest source of education intelligence to power decisions that matter. Request a Demo of our Global Education Market Intelligence Platform.
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