Chapter 13. Market Timing or Value Timing?

One of the central themes of this book is the size effect and the relative performance between active and passive investing are directly related. As stated, these are two sides of the same coin. The interaction between the indices’ weighting schemes and the size effect tells active investors and managers when to build index-like portfolios and when to pursue an active strategy.

The newer, equal-weighted S&P 500 index is tailor-made for empirically testing the desirability of a pure-passive strategy, a pure-active strategy, and a strategic asset allocation (SAA) and tactical asset allocation (TAA) to passive and active strategies. Visually analyzing the ratio of the cap-weighted to the equal-weighted S&P ...

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