An Examination of Fundamental Indexation
New Frontiers in Index Investing: Journal of Indexes, Vol. 58, pp. 32-37, January/February 2006
7 Pages Posted: 1 Jan 2008 Last revised: 3 Jan 2017
Date Written: November 2, 2010
We review the Fundamental Indexation concept in this paper and examine its performances out-of-sample using 20 years of international data. We find Fundamental Indexes outperform reliably in all developed countries selected for our study. In addition, we examine the out-of-sample performance using mid cap and small cap stocks. Again, we find Fundamental Indexes outperform with consistency. We are led to conclude that Fundamental Indexation works and is not a result of mining the U.S. data for spurious relationships; the evidence is compelling and overwhelming that Fundamental Indexing an improvement over traditional cap-weighted index construction.
Keywords: Fundamental Index, Indexing, Capitalization Weighting, Non-price-based Indexing
Suggested Citation: Suggested Citation