The High Cost Of Equal WeightingGuest Post
The High Cost Of Equal Weighting by Max Moroz, Engin Kose, Research Affiliates
Equal-weight indices have two clear advantages: They are easy to understand, and they generally outperform cap-weight indices over the long term. Their drawbacks are less apparent. They have higher turnover due to rebalancing than other smart beta strategies, and that turnover includes buying and selling lower-liquidity stocks. Our market impact model demonstrates that, as global assets under management increase, implementation costs tend to . . .
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