What's in Your Benchmark? A Factor Analysis of Major Market Indexes

We examine the factor exposures of several popular market capitalization indexes and how they vary over time. We find that most market capitalization weight indexes are effectively exposed to only two or three factors, with value and momentum being increasingly dominant. We find that the proportion of the index movements explained by factors has materially increased in recent years, which is consistent with a more top-down, macro-driven environment or the increasing importance of economy-wide risks for financial markets