browser Warning Icon You are using an older version of Internet Explorer. You are viewing this site with limited functionalities.
Outperformance in Equal-Weight Indices Why do equal-weighted indices often outperform their capitalization-weighted equivalents?
BY Tim Edwards

Equal-weight indices were among the first non-capitalization-weighted indices to emerge as templates for passive investments, or as benchmarks for the evaluation of active managers.1 Since their introduction, the concept has been extended to a wide range of markets and market segments, while products tracking equal-weight indices have attracted significant assets.


Exhibit 1 demonstrates one of the drivers of interest in equal-weight indices, namely their outperformance over their capitalization-weighted equivalents in a significant number of global equity markets.


This paper examines the sources of equal-weight index outperformance from various perspectives, including sectoral, factor-based, and constituent-level analyses, and provides a guide to the potential applications of equal-weighted investment strategies in a portfolio context.

Download Full Article (959K)
close

Sign up for email updates

Get our latest insight on the markets.

Thank you for subscribing!