This article introduces a sector-based ETF methodology that demonstrates optimal choices for risk-averse investors, suggesting financial benefits.
This article introduces a new indexing methodology for sector-based portfolios (exchange-traded funds, or ETFs) and demonstrates that virtually all risk-averse investors would optimally choose to hold the proposed sector-based index (ETF). We provide empirical evidence supporting this approach and illustrate the methodology through several examples. A comparison with existing market-capitalization-based ETFs highlights both the practical advantages and the theoretical appeal of our proposed indexing methodology.
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Weidong Tian (2026) studied this question.
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