I have read some material that suggested that index funds that use something other than a simple market cap weighting of stocks in the index should lead to higher growth. Wisdom Tree is a provider of such index EFTs. Their website shows a graph from Professor Jeremy Siegel comparing s&p500 index growth vs lowest P/E stocks from 1957-2011 where the lowest P/E quintile stocks have 4x the growth of the s&p500 index and this is very compelling.
However, when I look at their graph comparing the wisdom tree earnings 500 index (which I understand is their attempt to construct an index with a low P/E weighting) to the s&p500 index over 5 years from 2007 to 2012 the difference is only 2% (total, not per year) in favour of their index!
This suggests to me that in practice the theory is not leading to a significant growth advantage or that the implementation is not achieving what it should.
Has anyone looked into "fundamental" ETFs and seen strong evidence that some deliver significant enhanced growth.
However, when I look at their graph comparing the wisdom tree earnings 500 index (which I understand is their attempt to construct an index with a low P/E weighting) to the s&p500 index over 5 years from 2007 to 2012 the difference is only 2% (total, not per year) in favour of their index!
This suggests to me that in practice the theory is not leading to a significant growth advantage or that the implementation is not achieving what it should.
Has anyone looked into "fundamental" ETFs and seen strong evidence that some deliver significant enhanced growth.