Glossary term
Weighted Average
An average where each value carries a weight reflecting its importance. Index construction stands or falls on weighting choice: cap-weighted, equal-weighted, fundamentally-weighted and momentum-weighted give very different portfolios from the same universe. Rubin 100, HALO 100 and Euro-AI 50 publish all three weightings so users can compare.
Definition & Context
A weighted average is the sum of (weight × value) divided by the sum of weights. The choice of weighting is never neutral. In index construction, the same 100 stocks produce radically different portfolios depending on whether you weight by market capitalisation (dominated by a few mega-caps), equally (each name at 1%), by fundamentals (revenue, earnings, book value) or by momentum (recent price performance). Academic literature spent three decades debating which weighting produces higher risk-adjusted returns — equal-weight generally wins on Sharpe, but at the cost of much higher turnover.
Weighting also affects exposure implicitly. A cap-weighted S&P 500 is roughly 30% Magnificent 7 as of early 2026. An equal-weighted S&P 500 is less than 2% Magnificent 7 and more than 30% mid-cap industrial and financials. Investors who think they own the market through a cap-weighted fund actually own a momentum-tilted portfolio of whatever has risen fastest.
Why It Matters for Investors
Every Closelook index publishes three parallel weightings — cap-weighted, equal-weighted, momentum-weighted — so users can see how different construction choices change the story. Rubin 100 cap-weighted reflects the concentrated reality of AI-infrastructure spend (TSMC, Nvidia, SK Hynix dominate); Rubin 100 equal-weighted exposes the broader supply chain and mid-cap enablers that drive relative performance. The Functional Index approach depends on honest weighting choice.
Related Concepts
Weighting is the implementation of the Functional Index philosophy; it affects both Sharpe Ratio and Drawdown metrics.