Research and publications
Why Does an Equal-Weighted Portfolio Outperform Value- and Price-Weighted Portfolios?
This paper compares the performance of equal-, value-, and price-weighted portfolios of stocks in the major U.S. equity indices over the last four decades. It finds that the equal-weighted portfolio with monthly rebalancing outperforms the value- and price-weighted portfolios in terms of total mean return, four factor alpha, Sharpe ratio, and certainty-equivalent return, even though the equal-weighted portfolio has greater portfolio risk.
Author(s):
Yuliya Plyakha, Raman Uppal, Grigory Vilkov
Summary:
This paper compares the performance of equal-, value-, and price-weighted portfolios of stocks in the major U.S. equity indices over the last four decades. It finds that the equal-weighted portfolio with monthly rebalancing outperforms the value- and price-weighted portfolios in terms of total mean return, four factor alpha, Sharpe ratio, and certainty-equivalent return, even though the equal-weighted portfolio has greater portfolio risk.
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Register/Log in| Type : | Working paper |
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| Date : | 23/03/2012 |
| Keywords : |
Performance |
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