Bridge over ocean
1 November 2007 Financial Analysts Journal Volume 63, Issue 6

Fundamentally Flawed Indexing

  1. André F. Perold

Fundamental indexers argue that capitalization weighting is an inferior investment strategy because it necessarily invests more in overvalued stocks and less in undervalued stocks. This article shows that this claim is false. Capitalization weighting does not, by itself, create a performance drag.

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