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Why do equally weighted portfolios beat value-weighted ones?

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Why do equally weighted portfolios beat value-weighted ones? / Swade, Alexander; Nolte, Sandra; Shackleton, Mark et al.
In: Journal of Portfolio Management, Vol. 49, No. 5, 31.03.2023, p. 167-187.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Swade, A, Nolte, S, Shackleton, M & Lohre, H 2023, 'Why do equally weighted portfolios beat value-weighted ones?', Journal of Portfolio Management, vol. 49, no. 5, pp. 167-187. https://doi.org/10.3905/jpm.2023.1.482

APA

Swade, A., Nolte, S., Shackleton, M., & Lohre, H. (2023). Why do equally weighted portfolios beat value-weighted ones? Journal of Portfolio Management, 49(5), 167-187. https://doi.org/10.3905/jpm.2023.1.482

Vancouver

Swade A, Nolte S, Shackleton M, Lohre H. Why do equally weighted portfolios beat value-weighted ones? Journal of Portfolio Management. 2023 Mar 31;49(5):167-187. doi: 10.3905/jpm.2023.1.482

Author

Swade, Alexander ; Nolte, Sandra ; Shackleton, Mark et al. / Why do equally weighted portfolios beat value-weighted ones?. In: Journal of Portfolio Management. 2023 ; Vol. 49, No. 5. pp. 167-187.

Bibtex

@article{317f51939cb4488a82c9d6cf80da06b4,
title = "Why do equally weighted portfolios beat value-weighted ones?",
abstract = "Equal-weighted (EW) portfolios have outperformed their value-weighted (VW) counterparts over multiple decades in various investment universes. This article investigates the long-term evidence for the EW–VW return spread in a broad US equity universe across multiple factor models. Unsurprisingly, EW investing comes with a highly significant positive size factor exposure. Given its acyclic rebalancing character, EW investing is also found to benefit from short-term reversal effects while suffering from negative momentum exposure. The authors also document a pronounced seasonality effect in EW investing that would see outsized returns in January. They revisit these findings in the more investable universe of S&P 500 stocks and discuss how to best harvest the embedded factor premiums.",
author = "Alexander Swade and Sandra Nolte and Mark Shackleton and Harald Lohre",
year = "2023",
month = mar,
day = "31",
doi = "10.3905/jpm.2023.1.482",
language = "English",
volume = "49",
pages = "167--187",
journal = "Journal of Portfolio Management",
issn = "0095-4918",
publisher = "Institutional Investor, Inc",
number = "5",

}

RIS

TY - JOUR

T1 - Why do equally weighted portfolios beat value-weighted ones?

AU - Swade, Alexander

AU - Nolte, Sandra

AU - Shackleton, Mark

AU - Lohre, Harald

PY - 2023/3/31

Y1 - 2023/3/31

N2 - Equal-weighted (EW) portfolios have outperformed their value-weighted (VW) counterparts over multiple decades in various investment universes. This article investigates the long-term evidence for the EW–VW return spread in a broad US equity universe across multiple factor models. Unsurprisingly, EW investing comes with a highly significant positive size factor exposure. Given its acyclic rebalancing character, EW investing is also found to benefit from short-term reversal effects while suffering from negative momentum exposure. The authors also document a pronounced seasonality effect in EW investing that would see outsized returns in January. They revisit these findings in the more investable universe of S&P 500 stocks and discuss how to best harvest the embedded factor premiums.

AB - Equal-weighted (EW) portfolios have outperformed their value-weighted (VW) counterparts over multiple decades in various investment universes. This article investigates the long-term evidence for the EW–VW return spread in a broad US equity universe across multiple factor models. Unsurprisingly, EW investing comes with a highly significant positive size factor exposure. Given its acyclic rebalancing character, EW investing is also found to benefit from short-term reversal effects while suffering from negative momentum exposure. The authors also document a pronounced seasonality effect in EW investing that would see outsized returns in January. They revisit these findings in the more investable universe of S&P 500 stocks and discuss how to best harvest the embedded factor premiums.

U2 - 10.3905/jpm.2023.1.482

DO - 10.3905/jpm.2023.1.482

M3 - Journal article

VL - 49

SP - 167

EP - 187

JO - Journal of Portfolio Management

JF - Journal of Portfolio Management

SN - 0095-4918

IS - 5

ER -