Equally weighted indices are an increasingly popular alternative to traditional market capitalisation indices and are an example of smart beta index construction.
Smart beta investment portfolios are rule driven strategies that aim to outperform a benchmark or reduce risk in a transparent way as an alternative to active management. Often smart beta indices use weightings based on something other than market capitalisation, such as the equally weighted index. By design equally weighted indices have a greater allocation to smaller companies than their market capitalisation counterparts Most regional benchmark indices are weighted by market capitalisatio
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