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Why do equally weighted portfolios beat value-weighted ones?

Research output: Working paper

Forthcoming

Standard

Why do equally weighted portfolios beat value-weighted ones? / Swade, Alexander; Nolte, Sandra; Shackleton, Mark et al.
Portfolio Management Research, 2022.

Research output: Working paper

Harvard

Swade, A, Nolte, S, Shackleton, M & Lohre, H 2022 'Why do equally weighted portfolios beat value-weighted ones?' Portfolio Management Research.

APA

Swade, A., Nolte, S., Shackleton, M., & Lohre, H. (in press). Why do equally weighted portfolios beat value-weighted ones? Portfolio Management Research.

Vancouver

Swade A, Nolte S, Shackleton M, Lohre H. Why do equally weighted portfolios beat value-weighted ones? Portfolio Management Research. 2022 Nov 16.

Author

Swade, Alexander ; Nolte, Sandra ; Shackleton, Mark et al. / Why do equally weighted portfolios beat value-weighted ones?. Portfolio Management Research, 2022.

Bibtex

@techreport{f16b1f172ab747f1aa7340fdf3bb85ee,
title = "Why do equally weighted portfolios beat value-weighted ones?",
abstract = "The difference in performance between an equal-weighted (EW) portfolio or index and its value-weighted (VW) counterpart has been significant in the past but without a clear outperformance of one above the other. We analyze the relation between EW and VW portfolios in a Single Index model and link the differences in performance to the time-varying betas of the constituents as well as the boundaries of market concentration. We propose the difference in performance of EW minus VW portfolios as a highly informative and simultaneously very deterministic factor to proxy the development of the average constituent{\textquoteright}s beta and hence size effects. The proposed factor has similar characteristics as the SMB factor proposed by Fama and French (1993) but incorporates full market information.",
author = "Alexander Swade and Sandra Nolte and Mark Shackleton and Harald Lohre",
year = "2022",
month = nov,
day = "16",
language = "English",
publisher = "Portfolio Management Research",
address = "United Kingdom",
type = "WorkingPaper",
institution = "Portfolio Management Research",

}

RIS

TY - UNPB

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

AU - Swade, Alexander

AU - Nolte, Sandra

AU - Shackleton, Mark

AU - Lohre, Harald

PY - 2022/11/16

Y1 - 2022/11/16

N2 - The difference in performance between an equal-weighted (EW) portfolio or index and its value-weighted (VW) counterpart has been significant in the past but without a clear outperformance of one above the other. We analyze the relation between EW and VW portfolios in a Single Index model and link the differences in performance to the time-varying betas of the constituents as well as the boundaries of market concentration. We propose the difference in performance of EW minus VW portfolios as a highly informative and simultaneously very deterministic factor to proxy the development of the average constituent’s beta and hence size effects. The proposed factor has similar characteristics as the SMB factor proposed by Fama and French (1993) but incorporates full market information.

AB - The difference in performance between an equal-weighted (EW) portfolio or index and its value-weighted (VW) counterpart has been significant in the past but without a clear outperformance of one above the other. We analyze the relation between EW and VW portfolios in a Single Index model and link the differences in performance to the time-varying betas of the constituents as well as the boundaries of market concentration. We propose the difference in performance of EW minus VW portfolios as a highly informative and simultaneously very deterministic factor to proxy the development of the average constituent’s beta and hence size effects. The proposed factor has similar characteristics as the SMB factor proposed by Fama and French (1993) but incorporates full market information.

M3 - Working paper

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

PB - Portfolio Management Research

ER -