Financial Education

Fundamental indexing strategies attempt to form benchmarks based on fundamental factors such as book value, dividends or earnings rather than market capitalization. Proponents claim that the fundamentals provide a less biased estimate of a security’s fair value, and thus explain the value premium. Detractors claim that the strategies are simply “value investing in a shiny new wrapper.”

In the January/February 2008 Financial Analysts Journal,  Kaplan argues both fundamental and market-cap weightings provide valuable information, and argues in favor of approaches that combine both.

For more information, see all articles on: Active Management, Fundamental Analysis, Investing in Stocks, Investment Returns, Passive Management, Portfolio Management, Quantitative Analysis, Valuation

See also:

Pure Indexing in a Fixed Income Portfolio

Enhanced Indexing Strategies for Fixed Income Portfolios

Fundamental Risk and Arbitrage Strategies

Fundamental Law of Active Management

Fundamental Analysis Worksheet