Fundamental Indexation: An Australian Investigation

Mar, J; Bird, R; Casavecchia, L; Yeung, D

Fundamental Indexation: An Australian Investigation

Mar, J Bird, R

Casavecchia, L

Yeung, D

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Publication Type:: Journal Article
Citation:: Australian Journal of Management, 2009, 34 (1), pp. 1 - 20
Issue Date:: 2009-01-01

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Field	Value	Language
dc.contributor.author	Mar, J	en_US
dc.contributor.author	Bird, R https://orcid.org/0000-0003-0524-9377	en_US
dc.contributor.author	Casavecchia, L https://orcid.org/0000-0003-1452-3059	en_US
dc.contributor.author	Yeung, D https://orcid.org/0000-0002-3032-0449	en_US
dc.date.issued	2009-01-01	en_US
dc.identifier.citation	Australian Journal of Management, 2009, 34 (1), pp. 1 - 20	en_US
dc.identifier.issn	0312-8962	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10098
dc.description.abstract	Capitalisation-weighted indexes provide the basis for passive investment strategies designed to capture market performance. However, these cap-weighted indexes are claimed to be sub-optimal because of their tendency to overweight overvalued shares and underweight undervalued shares. U.S. evidence suggests that fundamental indexes, which select, rank and weight stocks according to fundamental measures of size such as book value and revenue, outperform cap-weighted indexes. This study examines fundamental indexation in an Australian context over the period 1995 to 2006 and finds support for the U.S. results. However, we also find that the superiority of fundamental indexation is largely explained by its inherent bias towards value stocks, which raises the question as to whether a more overt value tilt may not provide a superior means for exploiting mispricings in markets. © 2009, SAGE Publications. All rights reserved.	en_US
dc.relation.ispartof	Australian Journal of Management	en_US
dc.relation.isbasedon	10.1177/031289620903400102	en_US
dc.title	Fundamental Indexation: An Australian Investigation	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	34	en_US
utslib.for	150205 Investment and Risk Management	en_US
utslib.for	15 Commerce, Management, Tourism and Services	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	34	en_US

Abstract:

Capitalisation-weighted indexes provide the basis for passive investment strategies designed to capture market performance. However, these cap-weighted indexes are claimed to be sub-optimal because of their tendency to overweight overvalued shares and underweight undervalued shares. U.S. evidence suggests that fundamental indexes, which select, rank and weight stocks according to fundamental measures of size such as book value and revenue, outperform cap-weighted indexes. This study examines fundamental indexation in an Australian context over the period 1995 to 2006 and finds support for the U.S. results. However, we also find that the superiority of fundamental indexation is largely explained by its inherent bias towards value stocks, which raises the question as to whether a more overt value tilt may not provide a superior means for exploiting mispricings in markets. © 2009, SAGE Publications. All rights reserved.

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http://hdl.handle.net/10453/10098