A year ago, research was published that created a fair few ‘Monkeys beat fund managers' headlines. Now a further study revisits that theory - and looks again at the weaknesses of reliance on market cap weighted indices
The FTSE 100, S&P 500, Nasdaq, Hang-Seng – most of the widely used market indices are cap-weighted indexes, whose individual components are weighted according to their market capitalisation, so larger components carry a larger percentage weighting. Generally, investors benchmark their equity fund managers using market cap-weighted indices, and passive investors choose to track these indices. Cap-weighted equity indices have attracted a considerable following; S&P Dow Jones Indices' most recent estimate is that roughly 12% of the total market capitalisation of the S&P 500 is held in fu...
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