It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naive, non- optimized portfolios tend to outperform a...

It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naïve, non-optimized portfolios tend to outperform a...

The distribution of capital, or equivalently, the distribution of firm size, is studied in the context of equity markets modeled in continuous time. The capital distribution is defined to be the set of market weights arranged in decreasing order, and for the market of exchange-traded U.S....

The relative return of an equity portfolio with respect to the market is factored into three components. The factorization separates the effects due to change in the distribution of capital in the market, to change in rank of the stocks in the portfolio, and to dividends. The factorization is of...

Dynamic equity portfolios can be generated by positive twice continuously differentiable functions of the ranked capitalization weights of an equity market. The return on such a portfolio relative to the market follows a stochastic differential equation that decomposes the relative return into...

A general method is presented for constructing dynamic equity portfolios through the use of mathematical generating functions. The return on these functionally generated portfolios is related to the return on the market portfolio by a stochastic differential equation. Under appropriate...

Dynamic equity portfolios can be generated by positive twice continuously differentiable functions of the ranked capitalization weights of an equity market. The return on such a portfolio relative to the market follows a stochastic differential equation that decomposes the relative return into...

Hedge funds sometimes use mathematical techniques to quot;capturequot; the short-term volatility of stocks and perhaps other types of securities. This sort of strategy resembles market making and is sometimes considered a form of statistical arbitrage. This study shows that for the universe of...