Daily Archives: Jan 3, 2018 at 07:02 am EST

5 Questions For Herb Blank On Reverse Market-Cap Weighting

Weighting stocks based on market capitalization has long been the design standard for most index funds, but a recently launched ETF turns the strategy on its head. The Reverse Cap Weighted US Large Cap ETF (RVRS) holds the familiar S&P 500 names but in weights that are inversely proportional to their market cap. For example, the largest stock has the smallest weight and the smallest has the biggest footprint. What’s the rationale behind the strategy? Isn’t this just another twist on tapping into the small-cap factor? The Capital Spectator recently asked Herb Blank, a senior consultant at Global Finesse, to explain the motivation behind the strategy. In a recent study (“The Case for Reverse-Cap-Weighted Indexing”), Blank and co-author Qiao Duan report that reverse weighting outperformed the conventional S&P 500 for the ten-year period through 2016. The results offer “an intriguing alternative weighting scheme with the potential to realize superior rates of return,” they write.
Continue reading

Macro Briefing: 3 January 2018

South Korea offers border talks with North Korea: NY Times
Will Mitch Romney, a possible Trump foe, run for Utah’s Senate seat? CNN
Is China’s rising economic influence in Latin America a threat to US? Bloomberg
Trump threatens to cut Palestinian aid: Haaretz
Unemployment rate in Germany fell to record low in Dec: Bloomberg
Global Mfg PMI ends 2017 at seven-year high: IHS Markit
US Mfg PMI rises to two-year high in Dec: IHS Markit
Gold rises to highest close since September: Reuters