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Methodology

The Index is calculated in five steps:

1. Equally weight the seven economic factors as inputs to the Index.
2. Using multipliers, adjust real data to reflect these weightings relative to a preset value at launch
3. Track changes for the seven economic factors using either multipliers or inverse calculations
4. Update Index on a monthly basis given changes to the seven macroeconomic factors
5. Graph the Index's value on an ongoing basis

Step One - Equally weight the seven economic factors as inputs to the Index.

Step Two - Using multipliers, adjust real data to reflect these weightings relative to a preset value at launch

Step Three - Track changes for the seven economic factors using either multipliers or inverse calculations

• For inverse calculations,

  Contribution (t+1) = Contribution (t) + [(Actual Value (t) - Actual Value (t+1)) * Multiplier].

  A certain percentage increase in actual value causes the same percentage decrease in the factor's contribution to the Index. For example, the unemployment rate increased by 2.5% in February 2000, unemployment's contribution to the Index decreased by 2.5%.

   

• While the seven economic factors had equal weightings in January 2000, the relative weighting in February 2000 has changed along with changes to the seven economic factors during that month.

   

   

• Between January and February 2000, the Index increases by 0.47%, suggesting a slight improvement in economic conditions for ARM companies. This was caused mainly by an increase in the federal funds rate during the month.

   

Step Four - Update Index on a monthly basis given changes to the seven macroeconomic factors

- Changes in the actual value of the seven macroeconomic factors cause the individual factors to contribute different weightings to the Index monthly between January 2000 and December 2004.

- The market capitalization of public companies increased dramatically over these five years, causing significant upward movement in the Index. At the same time, significant increases to the unemployment rate and significant decreases in the federal funds rate exerted downward pressure on the Index during this five-year period.

- All seven macroeconomic factors combined to cause the Index to rise 28% between January 2000 and December 2004 at a compound annual rate of 5%.

Step Five - Graph the Index's value on an ongoing basis.