Wealth Added Index - WAI

Shareholders (people who own stock in a particular company) are in the shareholding game to make a buck. But how do shareholders know if it’s...worth it? Which companies to invest in?

The Wealth Added Index (WAI) is a metric created by Stern Stewart & Co. consulting group that measures exactly that: how much wealth has been added or subtracted from the bottom line for shareholders.

The WAI calculation is based off the idea that a company’s returns should exceed its cost of equity (the rate of return an investor needs before they start eyeing other investment opportunities). When a company is making more returns than the cost of equity, they’re making money for shareholders. If a company is making less return than the cost of equity, then shareholder value is being reduced (which means those shareholders should be shopping elsewhere).