beliavsky[at]aol.com wrote:
- quote -

A couple of items, one petty, one substantial.

The petty one is that, to quote the standard disclaimer, "one cannot
invest directly in an index". Investors may front-run particular stocks
(because they know that index funds will be forced to buy/sell them),
but not the index itself.

The more substantial point is that Standard and Poors telegraphs changes
well in advance, just as Russell does. Standard and Poors changes a few
stocks at a time of their choosing rather than all at once
(reconstitution) on a fixed date, but that's separate from whether the
changes are publicized in advance.

- quote -

You are correct about the short term (past few year) comparison of these
indexes. Though, "[o]ver the long-term [~18 years] it appears that the
differences in performance and risk between the Russell 2000 and S&P
SmallCap 600 benchmarks are relatively small."
http://www.ssga.com/library/resh/Com...1060800020.pdf

That's a fairly decent paper comparing the indices. With respect to
front running, it opines that "Active participants may attempt to game
the index changes for both indexes [so S&P's subjectivity is no
protection], but the Russell reconstitution garners the greatest
attention since it is once a year and has a larger amounts of assets
indexed against it."

Some index funds are willing to relax their tracking requirements to
compensate for, and even take advantage of, these effects. Vanguard for
one. (Barclay's does not.) In its closing remarks, the SSgA paper
cited says that SSgA does this as well. That brings us full circle -
one doesn't invest in indexes, one invests in funds, and the funds can
work this to their (and your) advantage.

--
Mark Freeland
nBeOwXs[at]pacbell.net

Mark Freeland wrote:

<snip
- quote -

I understand your point, but if you make the standards for an index
completely objective, it becomes easy to predict which stocks will be
added or removed, making it possible for others to front-run the index.
The construction of the Russell indices is more objective than the
construction of the S&P, but the last time I checked the Russell 2000
had underperformed the S&P 600 (both small cap indices) substantially
over the last few years, I think in part because people exploit the
annual Russell 2000 rebalance.

Well those sneaky so-and-sos. You're right, that's not a particularly
large large-cap is it?

Mark Freeland wrote:

- quote -

Will Trice wrote:
- quote -

Will,
You're correct that it's a large-cap index, but it includes stocks that
most people would call mid-cap or even small-cap. Though it's likely
that only a large-cap stock would be added to the index, they don't
automatically boot a stock out when its size falls out of range. By the
time a stock is removed it could drift as low as small-cap size, and of
course some drift to mid-cap and then rebound.

Right now the S&P site reports that the smallest issue in the index as
of 3/31 had a solidly-small market cap of $566M (I think it's Delta
Airlines).

It being a cap-weighted index, the large-caps predominate. So even
though mid-caps are in there, by definition their impact on the index
movement will be small.

-Tad

"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:425F1097.8000103[at]paragondynamics.com...
- quote -

Well ...

S&P Midcap 400 says "Market cap range between $1B - $4B. This range is
reviewed from time to time ..."
http://www2.standardandpoors.com/spf...00brochure.pdf
(Dec. 31, 2004)

Does that mean that S&P's definition of mid cap is somewhere around $1-4B?

What to make of its 500 brochure, then?
http://www2.standardandpoors.com/spf...00brochure.pdf
(Dec. 31, 2004)

The 500 index may add companies with "Market cap in excess of $3B". Does
that mean that the 500 can contain stocks that S&P defines as midcap
(between $3B and $4B)?

Even more telling, from the same 500 index brochure: "Company Size ...
smallest: $0.18B"

I think that by anyone's definition, that's a small cap company.

This is what I don't like about S&P "indexes" - they are arbitrary. Sure
S&P has standards, but if its committee doesn't like a stock ("lack of
representation"), or likes a stock that doesn't fit the criteria (such as
the $180M stock in the 500), those standards go out the window.

--
Mark Freeland
nBeOwXs[at]pacbell.net

jIM wrote:
- quote -

The S&P 500 is a large-cap index. It does not contain any mid-caps or
small-caps (at least by their definition of these classes). Right?

-Will

jIM wrote:
- quote -

I'm not sure what you mean by that. You can go to the S&P website and
download a fact sheet that will list all the companies that comprise
the S&P 500. Basically, it's the 500 largest market cap stocks in the
US market. There's no strict definition of what a mid cap or small cap
is.

- quote -

It's not really an issue, it's just a fact. All market cap-weighted
indexes have this characteristic (most indexes are market cap
weighted). Most people want an index to give more weight to stocks that
are more significant. Of course, some people don't want this
characteristic, so they have equally-weighted indexes too. Or you can
come up with something totally crazy like a price-weighted index liked
the Dow Jones.

OK, below is the definitive answer, straight from Wilshire customer
service. It turns out that the unaccounted 9% is neither mid-caps nor
micro-caps. Mid-caps are already contained in the large-cap and
small-cap groupings. Micro-caps are completely excluded from these
figures. The 9% comes from deletions from the index and some REITs and
Limited Partnerships.

----------------

These figures exclude the Micro Cap Index. You can find definitions on
our indices used in these calculations on our website at:

http://www.wilshire.com/Indexes/Wilshire/

The Large Cap 750, Mid Cap 500, Small Cap 1750 and Micro Cap Indices
are
rebalanced on June 30th each year. As you can see from the definitions
above a portion of the Mid Cap 500 Index is contained in the Large Cap
750 Index and a portion is in the Small Cap 1750 Index. At the date of
rebalance the Large Cap 750 Index contained 750 securities and the
Small
Cap 1750 Index consisted of 1750 securities. At the end of each month
the DJ Wilshire 5000 Index additions and deletions are made from the
Wilshire 5000 Index. If a security is deleted from the Wilshire 5000
Index then it will be deleted from its respective Large, Small or Micro
Cap Index. Only deletions impact these indices, additions to the
Wilshire 5000 willl not be considered until the rebalance on June 30th.
That is why you only have 684 securities in the Large Cap Index and
1681
in the Small Cap Index.

So there are two things that make up the 9% remainder. The first is
deletions from the index and the second is that REITs and Limited
Partnerships are not included in the Large and Small Groupings.

I like these sites. In particular a few points I see: S&P 500 is "a
select group of companies". Is there any way to prove that this group
includes "mid caps" or "small caps". I don't use index funds if I can
help it, but isn't there an issue where the largest 100 companies in
S&P are more than half it's market cap? Implying bottom 100 companies
according to S&P might be closer to Wilshire 4500 and not the overall
market?

Hmm, seems that I am the odd one out. =) It's hard to tell because
everyone's definition of large/mid/small/micro is different. And
Wilshire's site did not say what their cutoffs where. I was curious
myself, so I emailed Wilshire's help to get the definitive answer. I'll
post their answer when I receive their reply.

Here's another interesting question, on the Wilshire 5000
characteristics, it says that 44% are growth, 50% are value. What
happened to the remaining 6%? They have a asterisk mentioning that all
calculations exclude microcaps, which led me to believe that the
missing % are microcaps.

http://wilshire.com/Indexes/Broad/Wi...teristics.html

Matthew Johnson wrote:
- quote -

The rest is mid-cap.

--
Ron

Matthew Johnson wrote:
- quote -

I believe that is correct.

http://www.wilshire.com/Indexes/Broa...teristics.html
says that 684 companies make up 81.30%, and 1681 make up 10.18%. That
leaves about 3000+ companies to make up the remaining 9%, so I would
infer that they are microcaps.

Also, this page has a neat comparision.
http://www.moneychimp.com/articles/i...nds/styles.htm
The S&P chart shows that large caps are 79%, mid+small are 10%, and the
remaining are microcaps. So you can infer that what Wilshire is calling
"small caps" is equivalent to mid+small caps.

"Matthew Johnson" <mrjohns2[at]sbcglobal.net> wrote in message
news:z1Z6e.954$bc2.97[at]newssvr17.news.prodigy.com...
- quote -

I would guess the answer is mid cap. Odd that they don't specify mid cap
percentage.

I am trying to work on my asset allocation and again I return to one
question on how to break down a total stock market fund. The fund is
with Vanguard. I have emailed them this question, but I wanted to see
what the group would think.

After checking the Wilshire 5000 web page as previously suggest, I found
that the fund is about 81% largecap and 10% small cap, but it does not
say what the remaining 9% is. Micro cap? HELP!


Matt