Table 4. Value-Based Indexing vs. Fundamental-Based Indexing
Time 1: Both Stocks at Fair Value
  Traditional (Market-Weighted) Index Fundamental-Weighted Index
  Price
($)
No. Shares (Millions) Market Value ($, Millions) Holding (%) No. Shares (Millions) Market Value ($, Millions) Holding (%)
Stock A 12 500 6,000 60 500 6,000 60
Stock B 10 400 4,000 40 400 4,000 40
Portfolio   10,000   10,000  
Time 2: Stock A Becomes "Overvalued" and Fundamental-Weighted Index Is Rebalanced
  Traditional (Market-Weighted) Index Fundamental-Weighted Index
  Price
($)
No. Shares (Millions) Market Value ($, Millions) Holding (%) No. Shares (Millions) Market Value ($, Millions) Holding (%)
Stock A 15 500 7,500 65.2 460 6,900 60
Stock B 10 400 4,000 34.8 460 4,600 40
Portfolio   11,500   11,500  
Time 3: Both Stocks Return to Fair Value (Before Fundamental Index Is Rebalanced)
  Traditional (Market-Weighted) Index Fundamental-Weighted Index
  Price
($)
No. Shares (Millions) Market Value ($, Millions) Holding (%) No. Shares (Millions) Market Value ($, Millions) Holding (%)
Stock A 12 500 6,000 60 460 5,520 54.5
Stock B 10 400 4,000 40 460 4,600 45.5
Portfolio   10,000   10,120