The Avoidable Costs of Index Rebalancing
Robert D. Arnott (Research Affiliates), et al.
May 2022
Traditional capitalization-weighted indices generally add stocks with high valuation multiples after persistent outperformance and sell stocks at low valuation multiples after persistent underperformance. For the S&P 500 Index, in the year after a change in the index, additions lose relative to discretionary deletions by about 22%. Simple rules, such as trading ahead of index funds or delaying reconstitution trades by 3 to 12 months, can add up to 23 basis points (bps). This benefit doubles when we cap-weight a portfolio not selected on market value, but based on the fundamental size of a business or its multi-year average market cap.
Daily Archives: September 2, 2022
Macro Briefing: 2 September 2022
* Russia’s energy influence over Europe is “over,” predicts analyst
* Global bonds market in first bear market in a generation
* US mortgage rates up more than 50 basis points over past two weeks
* Global manufacturing output fell back into contraction in August via survey data
* US ISM Manufacturing Index steady in August, reflecting moderate growth
* Amazon’s efforts to block unionizing efforts appear to fail
* Big tech is looking to shift a portion of production out of China
* US jobless claims fell last week, easing to lowest level in two months:
