Index Construction and Fundamental Indexing with Rob Arnott

Rob Arnott joins Lotta Moberg, PhD, CFA, to continue their conversation on indexing, focusing on how index construction decisions shape outcomes for investors. Arnott examines the hidden effects of index membership, including how inclusion can influence valuations and create structural buying pressure, and why traditional market‑cap approaches may embed unintended biases. He introduces alternative approaches such as fundamental indexing, explaining how weighting by economic size rather than price can change portfolio behavior and return profiles. The discussion also explores turnover, momentum, IPO dynamics, and practical ways to think differently about benchmarks and passive investing. Arnott offers a perspective that challenges conventional definitions of "passive," encouraging a more critical view of how indices are built and used.