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  • Changing market dynamics over the last 25 years have generated the size exposure mirage trap which is disrupting the asset allocation process. Market dynamics have changed significantly over the last 25 or so years. Over this period the number of US investable stocks (as defined by the FT Wilshire 5000 index) has contracted significantly while equities have simultaneously appreciated over 600%. Additionally, there has also been a marked increase in large cap concentration. This has created impediments for rigid stock count index methodologies such as those utilized by the Russell 1000 and 2000 and others to capture genuine large cap and small cap exposures. This size mirage trap is disrupting the asset allocation and portfolio construction process.

     

    Author:

    Philip Lawlor, Managing Director, Market Research, Wilshire Indexes

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