n South African Actuarial Journal - Considering the use of an equal-weighted index as a benchmark for South African equity investors

Volume 19 Number 1
  • ISSN : 1680-2179



We analyse and discuss the use of an equal-weighted index as an alternative to the market capitalisation weighted (cap-weighted) index as a benchmark for active equity portfolios in the South African equity market. Our findings indicate that equal-weighted portfolios are, in general, more efficient than capweighted portfolios and that random active portfolios tend to display significantly improved risk-return characteristics when using an equal-weighted index as a benchmark. We find our results are robust to transaction costs involved with rebalancing.

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