Tag Archives: S&P 500 Equal Weight
Understanding the ESG Consequences of Factor-Based Investing: Part 2
In our previous blog, we looked at the S&P Factor Indices’ ESG exposures, showing that factor exposures can have an influence on ESG scores. In this blog, we’ll discuss these scores at the sector level and see how implementing an ESG or carbon reduction strategy on poorer ESG-performing factor indices can help investors…
- Categories Factors, Sustainability
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Surprising but Explainable
Equal-weight indices have a small-cap tilt. Therefore, one might naturally assume that the volatility of equal-weight indices is higher than that of their cap-weighted counterparts. Surprisingly, this is not always the case, and we can understand why using the lens of dispersion and correlation. Exhibit 1 shows that the volatility of the S&P 500® Equal…
- Categories Equities
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- Equities
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Higher Concentrations in the S&P 500 could lead to Equal Weight Outperformance
At last Friday’s close, S&P Dow Jones assigned a number of technology and consumer discretionary names into a new “Communication Services” sector classification. Relative to the old Telecommunication Services definitions, the sector has grown from 3 to 22 companies (not counting dual share listings) and is less concentrated in absolute terms. However, Communications Services remains…
- Categories Factors, S&P 500 & DJIA, Strategy
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- Factors, S&P 500 & DJIA, Strategy
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Investing in a World of Unknown Future Outcomes: The Benefits of Equal Weighting
Consider this thought experiment: You “know” that 499 of the companies in the S&P 500® will return exactly 5% next year. One will return 100%. You have no way to determine which stock will be the big winner, or to know or infer anything about its characteristics. You can invest in either a cap-weighted S&P…
- Categories Equities
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- Equities
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Explaining Equal-Weight Indices
Our recent paper explores the characteristics and applications of equal-weight indices from various standpoints. Since a number of equal-weight indices have outperformed their corresponding cap-weighted parents over the past 15 years, one of the most interesting perspectives asks if factors can help to explain the excess returns of equal weight. Which factors are most relevant?…
Security Selection & Sector Allocation Effects of Equal Weighting the S&P 500®
Constituents of the S&P 500 Equal Weight (EW) and S&P 500 are identical, but the EW version is rebalanced quarterly so that every company has equal representation after the rebalance. That often results in significantly different performance between the two indices, because equal weighting gives more representation to smaller stocks and alters the distribution of…
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- Equities, Uncategorized
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