Does Finance Theory Make the Case for Capitalisation- Weighted Indexing?

Proponents of cap-weighted stock market indices often argue that such indices provide efficient risk/return portfolios.

Author(s) :

Felix Goltz

Head of applied research at EDHEC-Risk Institute

Veronique Le Sourd

Senior research engineer at EDHEC-Risk Institute.

Presentation :

This paper reviews the evidence in the academic literature and concludes that only under very unrealistic assumptions would such indices be efficient investments. In the presence of realistic constraints and frictions, cap-weighted indices cannot, according to the academic literature, be expected to be efficient investments.
Pdf
Does Finance Theory Make the Case for Capitalisation- Weighted Indexing?...
(1.16 MB)
Type : Publication EDHEC
Date : le 11/01/2010
Extra information : Ce document constitue une synthèse de travaux scientifiques conduits au sein de l'EDHEC. Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay de la direction de la recherche de l'EDHEC : joanne.finlay@edhec.edu Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

- 06-04-2017
This week, to bring current and future challenges facing leaders directly to the classroom, the EDHEC Global MBA launches two 18-hour core courses devised and taught in collaboration with...
- 04-04-2017
The distinctive Multirank assessment ranks 1,500 prestigious schools and universities worldwide, including 74 French institutions.  EDHEC stands out in 2017 as the French business...
Frédéric Oudéa, Chief Executive Officer of Société Générale, meets EDHEC students
- 31-03-2017
Société Générale is one of the 3 banks in France’s CAC 40 stock index. The bank’s Chief...
- 30-03-2017
Close to 900 people attended the 9th edition of EDHEC Research Day held on Tuesday, 14 March 2017 on the EDHEC Lille Campus. We are very grateful for your interest and your role in the...