Exploring the alternatives to market cap weighting

Indexes are increasingly investible, but while market cap weighting remains the dominant methodology for exchange-traded funds and structured products, debates about its inefficient risk-return trade-off are as prominent as ever. But do alternative weighted strategies really deliver superior returns? By Magda Ali

Weighing the advantages of market cap and alternative weightings

For more than 50 years, financial engineering experts have focused on tracking the performance of markets through stock selection, based on the assumption that market cap weighted indexes were efficient. Since then, the size of assets under management tied to market cap weighted indexes has grown enormously, particularly over the last decade. However, this has attracted as much criticism as praise in the finance industry as well as the academic world. Many market participants vilify market cap

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here