Effect of Index Concentration on Index Volatility and Performance

The presented study investigated the effect of index concentration on component security and variances to explore possibility risk its impact performance in different markets. also 1/n with market cap find possible costs for investors. We analyzed BRICSU (BRICS plus USA) by applying various tools measures determining volatility returns help mean–variance model. did a simple simulation understand sensitivity relationships. found variance, covariance, varies market. It may be due levels investor biases inclusion multinational companies index. show how excessive growth few does not increase index, even delivering information benefits lower Sharpe ratio Equal weighted confirms nonexistence any cost concluded is generic process competitive condition.