Written on 23 March 2012.
The first annual SPIVA Awards support researchers from around the world that explore innovative techniques that enhance the use of indices in the financial markets. The awards were launched by S&P Indices as an international programme that recognises excellence in research on the topic of index-related applications. The first prize is awarded for distinctive, high-quality research in the use of financial market indices for investment analysis and management.
The laureates were selected by a jury of academics and industry experts consisting of David M. Blitzer, Managing Director and Chairman of the S&P Index Committee; Antii Petajisto, Visiting Assistant Professor of Finance at New York University Stern School of Business; Robert E. Whaley, Professor of Management and Co-Director of the Financial Markets Research Center at Vanderbilt University; Srikant Dash, Managing Director at S&P Indices; Vijay Singal, J. Gray Ferguson Chair Professor of Finance at the Pamplin College of Business, Virginia Tech; and Harold Evensky, President of Evensky & Katz and former Chair of the TIAA-CREF Institute Advisory Board.
The winning study compares the performance of equal-, value-, and price-weighted portfolios of stocks in the major U.S. equity indices over the last four decades. It finds that the equal-weighted portfolio with monthly rebalancing outperforms the value- and price-weighted portfolios in terms of total mean return, four factor alpha, Sharpe ratio, and certainty-equivalent return, even though the equal-weighted portfolio has greater portfolio risk. The total return of the equal-weighted portfolio exceeds that of the value- and price-weighted because the equal-weighted portfolio has both a higher return for bearing systematic risk and a higher alpha when using the four-factor model.