Tag Archives: equal weight

Feb 10, 2020

Unusual, but Not Unprecedented

Since its inception, the S&P 500® Equal Weight Index has outperformed the S&P 500 by 1.4% annually. Year-over-year performance margins, however, are anything but steady. Exhibit 1 shows that the S&P 500 Equal Weight Index and its cap-weight counterpart have gone through many performance cycles over the past 30 years. Mega caps experienced record performance…

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Jan 7, 2020

From “Hard to Beat” to Nigh-On Impossible

Our SPIVA® reports have shown, year after year, that market-cap weighted benchmarks are, to put it kindly, hard to beat.  However, in 2019 a range of circumstances made “hard to beat” become nigh-on impossible for the S&P 500®. In general, there are three common ways by which an active portfolio can outperform its benchmark: over…

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Feb 27, 2019

Can All the Children be Above Average?

February has been a great month for factor index performance: of the 17 S&P 500®-based factor indices reported in our quarterly factor dashboard, 11 have outperformed the “vanilla” S&P 500 so far.  Our indices focused on quality and shareholder return are having particularly strong months, with the S&P 500 Dividend Aristocrats®, the S&P 500 Buyback…

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Oct 17, 2018

Surprising but Explainable

Equal-weight indices have a small-cap tilt. Therefore, one might naturally assume that the volatility of equal-weight indices is higher than that of their cap-weighted counterparts. Surprisingly, this is not always the case, and we can understand why using the lens of dispersion and correlation. Exhibit 1 shows that the volatility of the S&P 500® Equal…

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Sep 24, 2018

Higher Concentrations in the S&P 500 could lead to Equal Weight Outperformance

At last Friday’s close, S&P Dow Jones assigned a number of technology and consumer discretionary names into a new “Communication Services” sector classification.  Relative to the old Telecommunication Services definitions, the sector has grown from 3 to 22 companies (not counting dual share listings) and is less concentrated in absolute terms.  However, Communications Services remains…

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Aug 22, 2018

Equal-Weight Versus Equal-Risk-Contribution Strategies – Performance Comparison

As we highlighted in a prior blog post, the risk decomposition of a multi-asset equal-weight portfolio showed that equities and commodities were the main contributors to total portfolio volatility. We then went on to explore what the weights would have been if we were to form an equal-risk-contribution portfolio consisting of the same assets. In…

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Aug 20, 2018

Equal-Weighting Versus Equal-Risk-Weighting Strategies

In a prior post, we reviewed the asset class risk contributions of a two-asset portfolio with varying weights. For an equal-weighted portfolio consisting of equities and bonds, we observed that nearly all contribution to total portfolio risk came from equities. To achieve equal risk contribution, the nominal weights in the portfolio would need to be…

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Jul 23, 2018

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

In a prior blog, we demonstrated that the S&P 500® Equal Weight Index was a more difficult benchmark to outperform than the S&P 500 over intermediate- to long-term investment horizons. In this blog post, we examine the underlying factor exposures of the S&P 500 Equal Weight Index to evaluate the performance of large-cap managers. As…

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Jul 16, 2018

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…

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Mar 27, 2018

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…

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