Structural Characteristics ETF Holdings and Transparency
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Variation on a Theme:
Cap-weighted Indices vs. Other
Weighting Methodologies
Many indices are purposefully
structured such that companies
with larger capitalizations are more
heavily weighted than companies
with more modest capitalizations.
These are referred to as “capweighted”
indices. Consequently,
a very large company may account
for a 10% component of the index,
while another company may only
account for 0.5%.
Equally weighted indices may
contain all of the components of
a similar cap-weighted index, but
instead of awarding larger companies
larger allocations of the
index, all component companies
occupy an equally weighted slice.
An equally weighted index of 50
companies, for instance, would
allot an equitable 2% to each and
every company and periodically
rebalance to maintain that 2%
individual allowance.
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