Perspectives: Fundamentally Flawed Indexing
Posted: 12 Dec 2007
Fundamental indexers argue that capitalization weighting is an inferior investment strategy because it necessarily invests more in overvalued stocks and less in undervalued stocks. This article shows that this claim is false. Capitalization weighting does not, by itself, create a performance drag.
Keywords: Investment Theory, Efficient Market Theory, Portfolio Theory, Portfolio Management, Equity Strategies
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