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Standard Indices, The Madness Of Crowds And The Case For Equal-Weighting

"Herein lies the problem with market based indices. They are subject to the madness of crowds."

"Herein lies the problem with market based indices. They are subject to the madness of crowds."
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5 comments on “Standard Indices, The Madness Of Crowds And The Case For Equal-Weighting

  1. Did I miss the time period between rebalancing to enforce “equal weighting”? Are there performance deviation studies that suggest conditions when one could switch strategies?

  2. I’ve been holding some Guggenheim RSP for a few years……waiting for it to outperform a typical S&P 500 index fund……..still waiting.

    I’ve had the same question…..exactly what conditions make this strategy outperform.

  3. Jan Adrianus Veenstra

    An uneducated guess. In small countries stock indexes may contain only a limited number of international companies, that profit much more from globalization and have a larger contribution in their national stock index. In such cases using weighting is a money losing approach. However, when some of the biggies in a stock index go bust, you would have been better of with the index as is. Think banks in Ireland.

  4. What about investing in a standard index when times are good and instead of switching to cash switch to equal weighted when you are worried about a correction coming up? When sentiment is bad switch back to standard index.

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