Index construction: Looking for alternatives! (Part 1)

Passive investing is booming - but what happens when the tried and tested rules reach their limits? In the current issue of "Economic Situation and Strategy", we put the foundations of classic index weighting to the test. Why could the previous successes of ETFs start to falter in the future? And how can the dilemma between concentration risks and market proximity be resolved without slipping into arbitrariness? A surprisingly simple mathematical idea could provide the key to greater stability and diversification - but does it work in practice? 

 

Read why it might be time to rethink - and what investors should be prepared for in a changed world.