Tag Archives: equal weight

Jan 13, 2021

Oscillations in Opportunity

2020 was a year of two reversals for the market. First, equities recovered from the depths of March to finish the year strongly, and second, smaller-cap and value stocks staged a roaring comeback in the final quarter. We can better understand the second reversal by analyzing the market’s distribution of returns and the performance of…

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Dec 8, 2020

Reversal or Recovery?

When we think about reversals in the market, we likely think of brief turnarounds in performance.  But what if it’s more? What makes a reversal turn into a recovery is a full-fledged long-term improvement in performance. We can apply this logic to Equal Weight’s recent experience.  After consistent underperformance since April 2017, the S&P 500®…

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Nov 16, 2020

Motions of the Market

The S&P 500® rose by 10% in the 12 months ending on Oct. 31, 2020, trouncing the S&P 500 Equal Weight Index by 9.1%, as seen in Exhibit 1. While such outperformance is not unprecedented, it does remind us of previous market peaks (especially in December 1999), and raises questions about whether a reversal may…

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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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