The Lemon Fool

Here is an interesting article:

https://www.pragcap.com/the-us-stock-ma ... been-told/

I believe his fears are misguided, however. CAPM, with many simplifying assumptions, concludes that we should all invest market weights in all the investments available to us. The investments that are not available to the market are irrelevant.

Holding by true market cap would lead to cap weighted trackers distorting the market by increasing demand for shares with lower free floats compared to those with high free floats.

It would also be impossible for cap weighted trackers to invest on the basis of true market capitalisation. For example, only 1.5% of Aramco shares have been listed, so there would be insufficient to share round on a true cap weighted basis.

There would also be issues with double counting, eg Berkshire Hathaway's ownership of Apple and other companies, or Vodafone's previously large holding of Verizon shares.