fintech-algorithms
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Equal-Weight Index

Install and import#

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/weighting-and-capping/equal-weight-index";

Signature#

calculate(data)

Every constituent counts the same. Simple to state and expensive to run: weights drift with prices immediately, so the construction implies continuous rebalancing and materially higher turnover.

Parameters#

NameTypeNotes
data{ ids: string[]; returns: number[] }Constituent ids and their period returns.

Returns#

{ ids, weights, portfolioReturn }

Equal weights and the resulting portfolio return.

Errors#

  • When ids and returns differ in length — throws

Complexity: time O(n), space O(n).

Worked example#

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input#

data
{
  "ids": ["A", "B", "C", "D", "E"],
  "returns": [0.02, -0.01, 0.015, 0.005, -0.004]
}

Call#

calculate(data)

Returns#

object with 3 fields: ids, weights, portfolioReturn

{
  "ids": ["A", "B", "C", "D", "E"],
  "weights": [0.2, 0.2, 0.2, 0.2, 0.2],
  "portfolioReturn": 0.0052
}

Diagrams#

Equal-Weight Index — article hero
Equal-Weight Index — failure guard
Equal-Weight Index — worked example

Calculation flow#

Equal-Weight Index calculation flow 
flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate Equal-Weight Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Equal-Weight Index methodology state 
stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

The rest of the Weighting and Capping family#