Some of America's most common indexes are value weighted, including the S&P 500 and Dow Jones Industrial Average. But, do value-weighted indexes perform better than equal-weighted indexes? Turns out, no. The chart below shows the growth of a $1 investment in equal and value-weighted indexes consisting of all U.S. public companies.
As you can see, a $1 investment in 1970 in our equal-weighted U.S. index provides more than twice the return as the same investment in our value-weighted index. Overall, the equal-weighted index provided a handsome 54,400% return while the value-weighted index provided a 23,400% return. Either way a great investment, but the equal-weighted index performed much better.
I gathered this data from CRSP's (Center for Research in Security Prices) monthly stock file and used Python to sort the data accordingly. Hope you enjoy!