Equally weighted index supposed to be bias toward small caps. And small caps usually have greater credit risk than big caps. Therefore, I could have made case for DS pretty easily. What ya think? Where my reasoning does not make sense?
This is a fixed income index, it’s not weighted by market cap but the # of issues for a given company. There is often a negative correlation between amount of bonds issued and creditworthiness of issuer, so the more issues a company has, the higher weight in a value-weighted index, and thus more risk of “bums.” Spreading the weights evenly reduces the risk of having too many “bums.”
Think of the bum’s problem. Companies will artifically have a larger market cap based on the amount of leverage they have. Thus a value-weighted index will be biased towards these “bums”.