Several recent papers report that investors would benefit from investing in equal-weighted portfolios instead of the traditional value-weighted portfolios. These papers employ theoretical models and simulated portfolios to support their recommendation. Since this switch would be a radical change from current practice for index investors, we re-examine this proposition by studying the historical performance of equal-weighted and value-weighted versions of five different S&P and Russell stock indexes over the last two decades. Adopting the individual investors’ perspective, we also examine the performance of exchange traded funds that track these indexes.
