Equity indexes and their characteristics

Dear All,

Is it required for the exam to know all indexes with their weighting, characterstics and rebalancing rules?

An extensive table is given in the curriculum, page 176, Reading 23. I guess, we have to know it?

I believe not.

I, for one, wouldn’t memorize that table.

Thank you, magician!

I try to note only the indexes, which are not value weighted and have special characteristics.

But why would an investor want to invest in equally weighted index anyway? The period rebalancing would cause higher transaction costs and the index is biased toward small caps…Is there any hidden motivation?

You’re welcome.

Unless you want exposure that’s biased toward small caps, I don’t know why you would.

Note that most index funds tracking equal-weighted indices are rebalanced quarterly, so you’ll potentially have a lot of tracking error, and the bias toward well-performing stocks will increase between rebalancing dates.

Memorizing a table like that is not really in keeping with the “conceptual” nature of the CFA exam.

The exam writers know that in the real world, if you need to know the details of a certain index, you can always look it up online.

I agree. Thank you both. Much enjoyable is the study process when supported by another’s knowledge and point of view : )

No , I don’t think It is required to know all the weighings and details about the indexes etc. Also may be they are not even asked in the exam .