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Weighing traditional versus alternative indexing approaches
As investors increasingly recognise the limitations of traditional, market capitalisation-weighted benchmarks, Northern Trust looks at the use of alternative approaches such as minimum-variance and minimum-volatility indices and portfolios.
There is ongoing research and discussion around alternative weighting schemes focused on the quest for a better representation or increased efficiency of the market portfolio. Among the index approaches under consideration, minimum-variance and minimum-volatility weightings are attracting increasing interest from academics, index providers and investors.
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