Tag Archives: Equal Weight education
There’s Nothing Equal About Equal Weight Returns
Let’s use the S&P 500 as a starting point since it is the most basic beta, or representation of the U.S. stock market. Since its launch in 1957, it has grown with the stock market and has become the most widely used benchmark of the U.S. stock market with numerous products tracking it. Although in…
- Categories Equities, S&P 500 & DJIA, Strategy
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- Equities, S&P 500 & DJIA, Strategy
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Can High Concentrations Lead to Equal-Weight Outperformance?
Assigning equal weights to each constituent, such as in the S&P 500 Equal Weight Index, historically would have offered material outperformance over capitalization-weighted benchmarks across a range of markets. Earlier this year, we published a paper examining how this occurred. There are several perspectives one can take, ranging from factor or sector exposures all the…
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What do inventories tell us about the economy?
Declining inventories and rising industrial production may create a strong backdrop for value and momentum strategies Falling business inventory ratios have often been a positive economic indicator. With business inventory levels on the decline, value and momentum strategies could be poised to outperform. A strategy that combines value and momentum could serve as a useful…
- Categories Equities, Factors, S&P 500 & DJIA
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Investing in a World of Unknown Future Outcomes: The Benefits of Equal Weighting
Consider this thought experiment: You “know” that 499 of the companies in the S&P 500® will return exactly 5% next year. One will return 100%. You have no way to determine which stock will be the big winner, or to know or infer anything about its characteristics. You can invest in either a cap-weighted S&P…
- Categories Equities
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Could Tax Reform Benefit Consumer Spending?
Investment strategies featuring the quality factor could benefit from current trends in consumer spending Retail sales surged by more than 5% in December, eclipsing previous highs. Consumer spending could be further bolstered by recently enacted federal tax cuts. Investment strategies that include the quality factor could benefit from higher consumer spending. Advance estimates of US…
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Explaining Equal-Weight Indices
Our recent paper explores the characteristics and applications of equal-weight indices from various standpoints. Since a number of equal-weight indices have outperformed their corresponding cap-weighted parents over the past 15 years, one of the most interesting perspectives asks if factors can help to explain the excess returns of equal weight. Which factors are most relevant?…