Understanding the Comparison:

• This is a single-period return calculation. It does not model rebalancing (required to maintain equal weights over time), transaction costs, or multi-period compounding effects.
• Equal-Weighting: Gives each asset an identical weight (1/N) in the portfolio, regardless of its market capitalization. This often results in higher exposure to smaller-cap assets within your selection compared to market-cap weighting.
• Market-Cap-Weighting: Assigns weights based on each asset's proportion of the total market capitalization of the selected assets. Larger assets have a greater influence on the portfolio return.
• Performance differences arise because these strategies have different exposures to factors (like size) and how they handle concentration. Equal-weighted strategies usually involve more turnover due to rebalancing.