Fundamental indexing superiority disputed; Claim of cap-weighting's drag on return is 'false'.

Pensions & Investments,  April, 2007  by Appell, Douglas

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Byline: Douglas Appell Fundamental indexing - touted as a "better mousetrap'' alternative to capital-weighted market indexes - won't necessarily catch more mice, according to Andre Perold. In a draft paper titled "Fundamentally Flawed Indexing,'' Mr. Perold, the George Gund Professor of Finance and Banking at Harvard Business School, argues that a pillar of the fundamental indexing sales pitch - that cap-weighted indexes deliver "inferior'' returns by overweighting overvalued companies and underweighting undervalued companies - doesn't stand up to scrutiny.

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