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Index funds are market cap weighted. The bigger the company, the more you buy proportionally. According to your hypothesis, Apple's PE should be the highest, an
by jldugger 9y ago
Index funds are market cap weighted. The bigger the company, the more you buy proportionally. According to your hypothesis, Apple's PE should be the highest, and yet it's clearly the lowest, at 16.
- skellera 9y agoI guess I meant passive investing in general. Many funds are buying the companies at different percentages.
- jldugger 9y agoIf different funds, each given the same dollar, buy different amounts of a stock, doesn't this mean they implicitly value those stocks differently?
- jnordwick 9y agoNot all. There are equally weighted indexes and tracking funds (eg $RSP). i don't think they get much volume though.