S&P500 Cap Weight versus Equal Weight

May 26, 2011 12:00pm by Barry Ritholtz

The S&P500 is one of the most widely held indices in the US. And yet, the Market Cap weighted version has a tendency to become dominated by a handful of big caps. This is especially likely towards the end of a major run, when a handful of megacaps dominate the trading action.

One possible solution? Replace, at least in part, the cap weighted index with an equal weight S&P: SPDR S&P 500 (SPY) with an equal weight ETF such as Rydex S&P 500 Equal Weight (RSP). See the Table below from The Chart Store:

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click for larger table

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