Abstract:
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.
