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Equal Weight Indexing - Seven Years Later

22 Pages Posted: 14 Oct 2010  

Srikant Dash

Standard & Poor's

Liyu Zeng

Standard & Poor's

Date Written: July 31, 2010

Abstract

Equal weighting is factor indifferent. It randomizes factor mispricing and is thus an attractive option for proponents of the theory that the market is inefficient and, at times, misprices factors. In January 2003, the S&P 500 Equal Weight Index (EWI) was introduced, pioneering the subsequent development of non-capitalization weighted indices catering to those investors questioning market efficiency. Criticism of equal weighted indices has centered on increased turnover and capacity constraints relative to market capitalization weighted indices. While true in abstract theory, neither is a serious hurdle in practice.

Keywords: S&P 500 Equal Weight Index, equal weighting, S&P 500

Suggested Citation

Dash, Srikant and Zeng, Liyu, Equal Weight Indexing - Seven Years Later (July 31, 2010). Available at SSRN: https://ssrn.com/abstract=1691213 or http://dx.doi.org/10.2139/ssrn.1691213

Srikant Dash (Contact Author)

Standard & Poor's ( email )

London EC2M 7NJ
United Kingdom

Liyu Zeng

Standard & Poor's ( email )

London EC2M 7NJ
United Kingdom

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