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S&P500 Cap Weight versus Equal Weight

Posted By Barry Ritholtz On May 26, 2011 @ 12:00 pm In ETFs,Markets | Comments Disabled

The S&P500 is one of the most widely held indices in the US. And yet, the Market Cap weighted version has a tendency to become dominated by a handful of big caps. This is especially likely towards the end of a major run, when a handful of megacaps dominate the trading action.

One possible solution? Replace, at least in part, the cap weighted index with an equal weight S&P:  SPDR S&P 500 (SPY) with an equal weight ETF such as Rydex S&P 500 Equal Weight (RSP). See the Table below from The Chart Store [1]:

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click for larger table
[2]

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See also: S&P 500 ETFs: Market Weight Vs. Equal Weight [3]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2011/05/sp500-cap-weight-versus-equal-weight/

URLs in this post:

[1] The Chart Store: http://www.thechartstore.com/Default.aspx?AspxAutoDetectCookieSupport=1

[2] Image: http://www.ritholtz.com/blog/wp-content/uploads/2011/05/12.gif

[3] S&P 500 ETFs: Market Weight Vs. Equal Weight: http://www.forbes.com/2010/05/27/index-fund-personal-finance-market-equal-weight.html

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