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a bias in rollouts

Posted By: David Montgomery
Date: Friday, 2 May 2008, at 9:01 p.m.

In Response To: a bias in rollouts (bob koca)

I'm not sure whether this has been pointed out before ... I think probably.

The same sort of thing is the basis for relatively new alternatives to index mutual funds. An S&P 500 index mutual fund allocates funds based on the valuation of the companies. You buy more of those companies that are overall more highly valued. But some companies are overvalued, and some undervalued, so this weighting ensures that you overweight companies that are too expensive, and underweight companies that are bargains.

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