Most of us are familiar with market-cap weighting, where the largest companies receive the largest share, and even
equal weighting, which is self-explanatory.
It thus took some four decades to revive equal weighting, which under today's low-commission and computerized world, handily outperforms market-cap indexing "without a material increase in risk," the authors say.
Fundamental indexing's advantage over equal weighting reached as high as 280 basis points in the Australian market over the period under simulated study (1985-2013).