A study comparing the performance of equal-, value-, and price-weighted portfolios of stocks in the major US equity indices over the last four decades has won a prestigious award.
Raman Uppal, Member of EDHEC-Risk Institute and Professor of Finance at EDHEC Business School, along with co-authors Grigory Vilkov and Yuliya Plyakha, both of Goethe University in Frankfurt, has been awarded first prize at the SPIVA Awards for the paper “Why Does an Equal-Weighted Portfolio Outperform Value- and Price-Weighted Portfolios?”
The paper 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.
