equityweighted
Equityweighted, also written as equity-weighted, is a method used to assign weights to the components of a portfolio or index based on their equity value, typically measured by market capitalization. Under this approach, larger companies by market value receive higher weights, while smaller companies receive smaller weights.
In practice, the weight of a security i is calculated as its market capitalization (price times shares
Applications include index construction, portfolio management, and risk modeling. The method aims to capture the economic
Advantages of equity weighting include alignment with relative company size and liquidity, automatic rebalancing to reflect
Alternatives to equity weighting include equal weighting, price weighting, and fundamental weighting. See also capitalization-weighted indexing,