Allocation Characteristics of Index Weighting Schemes

23 Pages Posted: 25 Nov 2014 Last revised: 6 Apr 2017

See all articles by Lars Kaiser

Lars Kaiser

University of Liechtenstein

Date Written: April 6, 2017


This study sheds light on the entanglement of index weighting schemes. We show that a high degree of absolute holdings overlap is not a sufficient measure of the level of conformity with a benchmark. Secondly, we take a closer look at portfolio concentration and market contagion, and monitor a pattern where index weighting schemes experience highly correlated returns after 2008, alongside a drop in relative portfolio holdings overlap during periods of increased market volatility. We are able to show that portfolio concentration is caused by a 'flight to familiarity' and as such, the impact of market contagion is largely consistent across alternative index weighting schemes.

Keywords: enhanced indexing, full replication, sampling, holdings overlap, Bray-Curtis dissimilarity, dynamic norm constraints

JEL Classification: G11

Suggested Citation

Kaiser, Lars, Allocation Characteristics of Index Weighting Schemes (April 6, 2017). Available at SSRN: or

Lars Kaiser (Contact Author)

University of Liechtenstein ( email )

Fürst Franz Josef Strasse
Vaduz, 9490
+423 265 1186 (Phone)


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