Equity Index Investing

Equity index investing is a proxy for investing in an asset class. It is an efficient way to gain economic exposure to the publicly traded equity markets. The chosen index is assumed to represent the risk and return properties of an asset class to which the investor wishes to obtain exposure.

In the United States, the public equity market is so large that a number of different indices have been constructed to capture different parts of the stock market. For example, the S&P 500 is designed to track the largest capitalized stocks in the United States. Conversely, the Russell 1000 and 2000 are designed to track large, mid, and small cap stocks. Last, the Wilshire 5000 is designed to capture the full public equity market in the United States. The size and growth of equity index investing has distinct implications for corporate governance programs.

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