Bridge over ocean
1 September 2005 Financial Analysts Journal Volume 61, Issue 5

Why Market-Valuation-Indifferent Indexing Works

  1. Jack Treynor

Using market values for indexing gives more portfolio weight to the stocks with positive price errors and less portfolio weight to the stocks with negative price errors. Market-valuation-indifferent indexing—such as equal weighting or weighting by number of employees, number of customers, or sales—relies on averaging over hundreds of stocks to give equal weight to the two groups.

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