Daniel Robert Caponi, Rory T. Houser



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The two major approaches to weighting market indexes are price weighting (DOW) and market cap weighting (S&P 500). In this study, we use a Smart Beta approach by weighting stocks based on their fundamental and earnings growth characteristics. Using price to earnings, price to book, price to sales, and price to cash flow measures plus expected one year earnings growth, we weight the top 10 holdings of the SPDR Consumer Discretionary ETF (XLY) and compare their performance as a portfolio of stocks to XLY, the DOW, and the S&P 500 for the year 2014. Two weighting strategies are used. A momentum strategy which gives higher weights for higher price-to metrics, and a relative value strategy which gives higher weights to stocks whose inverted price-to's are higher. The concentrated portfolio begins in 2014 with a beginning value of $5,000,000.

Publication Date


Project Designation

Independent Research

Primary Advisor

Trevor C. Collier

Primary Advisor's Department

Economics and Finance


Stander Symposium project


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A Smart Beta Approach to Portfolio Weighting for a Concentrated Portfolio of Consumer Discretionary Stocks