Tag Archives: equal weight

The S&P 500 Equal Weight Index: A Supplementary Benchmark for Large-Cap Managers’ Performance – Part I

In January 2003, S&P Dow Jones Indices introduced the world’s first equal-weighted index, the S&P 500® Equal Weight Index, leading the way for the subsequent development of non-market-cap weighted indices.[1] Since then, looking at the index’s historical back-tested performance, it outperformed its market-cap-weighted counterpart, the S&P 500, in 16 out of 28 years, with an Read more […]

How Equal Weight Avoided Japan’s “Lost Decades”

S&P Dow Jones Indices recently launched the S&P Japan 500 Equal Weight Index, an equal-weight version of the S&P Japan 500.  Over the 15-year period ending in February 2018, encompassing the latter part of Japan’s so-called “lost decades” of stagnant equity returns, the equal-weight index would have outperformed the cap-weighted Japanese equity benchmark by a stonking Read more […]

The Impact of Size on Active Management Performance in 2017: Part 1

U.S. equity markets finished 2017 on a strong note, with the S&P 500® returning 21.83% during the one-year period ending on Dec. 31, 2017. This was followed by the S&P MidCap 400® and S&P SmallCap 600® returning 16.24% and 13.23%, respectively. Despite market-cap weighting being a dominant form of indexing, equal weighting has outperformed on Read more […]

Technology may be de-FANGed, but could the CHANDs leave you hanging?

It has not been a great start to the week for the technology sector, with large-cap tech stocks dragging down equity indices across the globe. With the current media focus on the industry behemoths, suitably arranged into fun acronyms (“FANGs” and so on), investors in the U.S. tech sector might be concerned about the risks Read more […]

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 Read more […]

The Skew Is Not New

Market observers have noted that the S&P 500’s performance so far this year has been dominated by a small number of technology stocks.  This observation is certainly correct, although it’s fair to question the relevance of a statistic based on fewer than two months’ data.  What’s more important is to bear in mind that this Read more […]

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 Read more […]

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 Read more […]

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 Read more […]

Mutual Fund Portfolios: Equal Weight or Cap Weight?

Equal-weighted indices typically outperform their cap-weighted counterparts (although 2017 so far has proven to be an exception to the general rule).  This means that portfolio managers can usually create a performance tailwind by equal weighting rather than cap weighting their holdings. But do they?  One way to assess this question is by using the Herfindahl-Hirschman Read more […]