Fundamental Weighting

Journal of Applied Finance, Vol. 20, No. 1, pp. 64-77, 2010

Posted: 4 Jun 2012

See all articles by Ben S. Branch

Ben S. Branch

University of Massachusetts Amherst - Isenberg School of Management

Li Cai

Illinois Institute of Technology - Stuart School of Business, IIT

Journal of Applied Finance Submitter

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2010

Abstract

Herein we compare the performance of fundamental weighted indexes to a traditional value weighted index on a back tested basis. Working with the pre-selected S&P 500 components, we isolate the effect of changing the weighing scheme. As an additional test, we transformed the value-weighted measure by taking the square and higher roots in order to test the impact of size dampening transformations. Our results generally support the benefits of indexing with fundamental weights, even after taking account of transactions cost.

Keywords: stock price indexes, price indexes, stocks prices, Standard & Poor's 500 Index, indexes, stock index futures

Suggested Citation

Branch, Ben S. and Cai, Li and Finance Submitter, Journal of Applied, Fundamental Weighting (March 1, 2010). Journal of Applied Finance, Vol. 20, No. 1, pp. 64-77, 2010, Available at SSRN: https://ssrn.com/abstract=1652440

Ben S. Branch

University of Massachusetts Amherst - Isenberg School of Management ( email )

Room 201A
Amherst, MA 01003-4910
United States
413-545-5690 (Phone)
413-545-3858 (Fax)

Li Cai

Illinois Institute of Technology - Stuart School of Business, IIT ( email )

Chicago, IL 60661
United States

Journal of Applied Finance Submitter (Contact Author)

affiliation not provided to SSRN ( email )

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