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www.journalofindexes.com Vol. 14 No. 1 features Improved Beta? by Noël Amenc, Felix Goltz and Lionel Martellini ........................ 10 Comparing index weighting methodologies. The Evolution Of Equal Weighting by Pradeep Velvadapu ..................... 20 What happens when you equal-weight sectors?. The Weight Debate with Robert Arnott, Gus Sauter, Scott Ebner, Srikant Dash, Frank Nielsen and Chris Woods . . 30 Experts opine on the intricacies of weighting schemes. Core Vs. Blend by David Blanchett ........................ 36 Do “core” indexes outperform “blend” indexes? Benchmarking Microfinance Equity Investments by Peter Wall ............................ 40 How to construct an index of microfinance institutions. Sorting And Digging by David Blitzer .......................... 50 The art of dividing the market into useful pieces. Better Beta By Bananas by Lara Crigger ........................... 64 The grueling quest for the ultimate weighting scheme. news Indexes Regain Edge Over Active . . . . . . . . . . . . 52 TD Ameritrade Offers Commission-Free ETFs . . 52 MIT Launches Own Inflation Indexes . . . . . . . . . 52 Wave Of ETF Closures Announced In Sept., Oct. . 52 Indexing Developments . . . . . . . . . . . . . . . . . . . 53 Around The World Of ETFs . . . . . . . . . . . . . . . . 56 Back To The Futures ..................... 58 Know Your Options ...................... 58 On The Move ........................... 58 10 20 data Selected Major Indexes . . . . . . . . . . . . . . . . . . . 59 Returns Of Largest U.S. Index Mutual Funds . . . 60 U.S. Market Overview In Style . . . . . . . . . . . . . . 61 U.S. Industry Review ..................... 62 Exchange-Traded Funds Corner . . . . . . . . . . . . . 63 36 POSTMASTER: Send all address changes to Charter Financial Publishing Network, Inc., P.O. Box 7550, Shrewsbury, N.J. 07702. Reproduction, photocopying or incorporation into any information-retrieval system for external or internal use is prohibited unless permission is obtained in writing beforehand from the Journal Of Indexes in each case for a specific article. The subscription fee entitles the subscriber to one copy only. Unauthorized copying is considered theft. www.journalofindexes.com January / February 2011 1
Contributors Noël Amenc Noël Amenc is a professor of finance and director of development at EDHEC Business School, where he heads the EDHEC-Risk Institute. Amenc has a master’s degree in economics and a Ph.D. in finance and has conducted active research in the fields of quantitative equity management, portfolio performance analysis and active asset allocation. He is a member of the editorial board of the Journal of Portfolio Management, associate editor of the Journal of Alternative Investments and a member of the scientific advisory council of the AMF (French financial regulatory authority). David Blanchett David Blanchett is the director of Consulting and Investment Research for the Retirement Plan Consulting Group at Unified Trust Company in Lexington, Ky. He is primarily responsible for helping 401(k) advisers with fiduciary, compliance, operational and investment issues relating to Unified Trust’s retirement plan services. Blanchett has published over 30 papers in various industry journals. He is a CFA charterholder and recently completed his MBA at the University of Chicago Booth School of Business. David Blitzer David Blitzer is managing director and chairman of the Standard & Poor’s Index Committee. He has overall responsibility for security selection for S&P’s indices and index analysis and management. Blitzer previously served as chief economist for S&P and corporate economist at The McGraw-Hill Companies, S&P’s parent corporation. A graduate of Cornell University with a B.S. in engineering, he received his M.A. in economics from Georgetown University and his Ph.D. in economics from Columbia University. Lara Crigger Lara Crigger is an associate editor at Index Publications. She oversees editorial content for Hard Assets Investor, and provides research and content for Index Universe, Hard Assets Investor, Journal of Indexes and the Exchange-Traded Funds Report. Prior to joining Index Publications, Crigger was a freelance journalist specializing in finance and technology. She holds a B.S. in physics from the Rochester Institute of Technology. Felix Goltz Felix Goltz is head of Applied Research at EDHEC-Risk Institute. He conducts research in empirical finance, asset allocation and performance analysis, with a focus on indexing strategies. Goltz’s research has been published in international academic and practitioner journals and handbooks, and he is a frequent speaker at industry conferences. Goltz obtained a Ph.D. in finance from the Université de Nice Sophia Antipolis after studying economics and business administration at the University of Bayreuth and EDHEC Business School. Pradeep Velvadapu Pradeep Velvadapu is a senior research analyst for the index business at Russell Investments, based in Seattle. As part of the research and innovation group, he is responsible for conducting research and analysis necessary for the development of new index and investable products, and the maintenance and enhancement of existing products. Velvadapu joined Russell in 2006 as a member of the research team responsible for the development and construction of the Russell Global indexes, launched in January 2007. Peter Wall Peter Wall is founder and CEO of Wall’s Street Advisor Services, a consultancy specializing in innovations in financial information services. He has over 30 years’ experience in developing and marketing financial information services, with International Finance Corporation, FTSE International and most recently, Microfinance Information Exchange Inc. In these capacities, Wall has also been active in many index and international financial reporting standards-setting activities. A member of the CFA Institute, he is based in Falls Church, Va. 2 January / February 2011
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INVESTING IN THE FUTURE OF THE U.S.
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