Abstract
We provide evidence that for the developed markets that were part of the MSCI EAFE index over the 1970–2004 period, an equally-weighted index outperforms market-cap and GDP-weighted indices. Two important characteristics distinguish the equally-weighted index from its counterparts: lower concentration and more frequent rebalancing. We simulate international equity portfolios along these two dimensions. Lower concentrated portfolios almost systematically dominate more concentrated portfolios. Though rebalancing dominates no rebalancing, the relation between international portfolios rebalanced according to different frequencies is more tenuous.
TOPICS: Mutual funds/passive investing/indexing, developed markets, equity portfolio management
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