Tag Archives: S&P 500 Equal Weight
Sizing Sectors
After peaks in S&P 500® concentration, the S&P 500 Equal Weight Index has tended to outperform, suggesting that there is a relationship between changes in concentration and the relative performance of equal weighting. But, does this relationship also occur at the sector level? Using the historical adjusted HHI (Herfindahl-Hirschman Index), we’ve previously established that concentration…
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Contemplating Concentration
After the exceptional performance of large-cap stocks in recent years, concentration concerns naturally come to mind. There are many ways to measure concentration. A simple method is to add up the weight of the top names, but the drawback with this approach is it doesn’t incorporate all the constituents in an index. The Herfindahl-Hirschman Index…
- Categories S&P 500 & DJIA
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Valuing Equal Weight
We have previously discussed the impact of Equal Weight’s rebound on its exposure to the momentum factor. We now turn our attention to its exposure to the value factor, as the recovery in smaller caps and value stocks has been an important tailwind for the strategy. The S&P 500® Equal Weight is typically biased toward…
Mean Reversion and Momentum
After almost four years of underperformance, we witnessed a change in fortune in February 2021, as the relative performance of the S&P 500® Equal Weight Index turned positive. By the end of April, Equal Weight had outperformed the S&P 500 by 11% over the prior 12 months, as we see in Exhibit 1. Equal Weight’s…
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Equal Weight Indexing during Economic Recovery
2020 was a year for the history books – especially from a finance perspective. With COVID-19 ripping throughout the globe, we saw equity markets decline rapidly as several countries closed their borders. At the same time, however, we saw some companies flourish as people spent more time at home. Companies like Apple, Microsoft, and Google1…
- Categories Equities
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Exploring Equal Weight’s Impact on Risk/Return
What are the potential risk/return benefits of the S&P 500 Equal Weight Index? S&P DJI’s Hamish Preston and Tim Edwards explore what’s driving the mega-cap trend, multi-decade highs in S&P 500 concentration, and potential applications for the S&P 500 EWI.
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Man Bites Dog: The Year for Active Management?
For at least five years, we’ve noticed that, despite historical performance, active managers regularly proclaim that this year will at last be the time when active management shows its value. I suspect that most advocates of indexing derive at least some guilty pleasure from observing this ritual. (I know I do.) So, we want to…
- Categories Equities, S&P 500 & DJIA
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- Equities, S&P 500 & DJIA
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The Case for Equal Weight Indexing
2020 witnessed outperformance from some of the largest S&P 500® companies as investors expected these firms to be better placed to navigate the COVID-19 environment. Exhibit 1 shows that this outperformance led to the largest names accounting for an unusually high proportion of the U.S. large-cap equity benchmark, and therefore having a bigger impact on…
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…
- Categories Factors, S&P 500 & DJIA
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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…