Where Were We?... Continuing on from the conversation about fair-value weighting versus market-capitalization weighting, we already know that we can never construct a fair-value weighted index or …
Help Us Name A New Product
The weekly Lap of The Blogs is postponed this week as I have a special request. We've been burning the candle at both ends as we have an insurance company who we've been meeting with in order to bring …
Fair Value Weighting Part II
Unfortunately, I don't have much time to write in as much detail as I normally would, so let me basically use Harry Markowitz's example of a fair-value weighting example: Let's assume we have a new …
Indexing Based on Fair Values Instead of Market Cap
Fair-Value Weighting an Index First: This is impossible! No-one knows the true fair value of a company, so keep in mind the purpose of this demonstration is strictly academic, theoretic and shouldn't …
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Cap-Weighting Magnifies Your Exposure to Pricing Errors In The Wrong Ways
Market Capitalization Weighted indices have a significant structural flaw. Namely, they overweight your pricing errors when they are unfavourably wrong and they underweight your pricing errors when …
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Contest Winners!
Thanks to everyone who participated in the contest. There were over 115 entries composed of comments, gravatars and other bloggers promoting the contest. I'll get right to it... The winner of the GPS …