May 17, 2002

During the heyday of the bull market it became fashionable to calculate the minimum number of stocks that could replicate the performance of the S&P 500 assuming that the remaining stocks produce a zero average return. We too played this game. Our calculations show that during 1998 it took 48 stocks with a market cap of 42.68% to replicate the performance of the S&P 500. In 1999 the number of stocks declined to 18. These stocks accounted for only 21.60% of the S&P market capitalization. In 2000 the decline continued. It only took 7 stocks, with a 16.83% weight in the S&P 500, to replicate the performance of the S&P 500. (full article attached)

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