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The Global Rise of the Value-Weighted Portfolio
Utpal Bhattacharya Indiana University Bloomington - Department of Finance Neal Galpin Texas A&M University - Department of Finance March 2007 AFA 2007 Chicago Meetings Paper Abstract: We do three things in this paper. We first develop a metric to measure the popularity of the value-weighted portfolio in a stock market. We use our metric to document that, though the value-weighted portfolio is less popular in emerging markets than in developed markets, its popularity is increasing everywhere. In the United States, for example, trading in the value-weighted portfolio could only explain 32% of trading volume in the 1920s, but can explain 68% in the 2000s. Finally, as we have better data for the United States, we explore why the value-weighted portfolio is becoming more popular.
Keywords: portfolio theory, value-weighted portfolio, diversification, indexing, stock picking JEL Classifications: G11, G14, G15 Working Paper SeriesDate posted: November 18, 2005 ; Last revised: December 22, 2009Suggested CitationContact Information
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