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Against the Status Quo

A Detailed Decomposition of the Market Composition

September 24, 2020 by Aaron Gilman

2020 has been an interesting year for investors so far and it is showing no signs of letting up any time soon. The most popular and widely followed stock market indices are typically market-capitalization weighted (read more about it here https://www.investopedia.com/terms/c/capitalizationweightedindex.asp) and at times can be rather misleading when used as a proxy for performance of the stocks within the index. If you are unfamiliar with the drawbacks and advantages of the various index weighting methodologies, the EDHEC Risk Institute has a very thorough whitepaper on the subject that is worth a read: https://risk.edhec.edu/sites/risk/files/improved-beta-comparison-index-weighting-schemes.pdf.

The purpose of this blog post is to look under the hood of the stock market indices by examining the constituents (the individual companies that make up the index) and the performance throughout the year.

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About Me

I serve as the Chief Investment Officer for Independent Financial Partners and President of IFP Asset Management. I am a CFA® charterholder, and also have the CFP® designation.

In my spare time I taught myself how to write code in R, Ruby and Python. I use these skills to explore investing and accelerate the way I consume market data.

Recent Posts

  • A Detailed Decomposition of the Market Composition September 24, 2020
  • A Quantitative Review of Inflation and Monetary Policy in the United States September 16, 2020
  • A Letter from the desk of the CIO: Q2 2020 Review July 24, 2020
  • A Tale of Two Frequencies June 16, 2020
  • Staying Grounded During Epidemics March 10, 2020

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Securities offered through IFP Securities, LLC, member FINRA/SIPC. Investment advice offered through IFP Advisors LLC, a registered investment adviser. IFP Securities, LLC and IFP Advisors, LLC are two separate entitles under common ownership, and Independent Financial Partners (IFP) is a dba for both entities.