Perspectives: Fundamentally Flawed Indexing

Posted: 12 Dec 2007

See all articles by André Perold

André Perold

Harvard Business School - Finance Unit

Abstract

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

Suggested Citation

Perold, André F., Perspectives: Fundamentally Flawed Indexing. Financial Analysts Journal, Vol. 63, No. 6, 2007, Available at SSRN: https://ssrn.com/abstract=1070839

André F. Perold (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6680 (Phone)
617-496-6592 (Fax)

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