Equal Weight S&P 500 Strategy Outperforms or Underperforms Benchmark in Simulated Trading

Market Universe

Use the S&P 500 constituents as the market universe. This provides a broad, liquid, and representative sample of U.S. equities while simplifying data management. If you prefer a different subset (e.g., mid-cap or sector-specific), specify it.

Weighting and Capital Allocation

Apply equal-weighting to all 500 names daily. This approach avoids overcomplicating the simulation with subjective allocation rules. Assume no cash buffer or leverage unless explicitly instructed otherwise.

Price Used for Entry/Exit

Use close-to-close pricing (enter at today’s close, exit at tomorrow’s close). This convention aligns with standard back-test practices and avoids lookahead bias. If you require open-to-close or open-to-open pricing, clarify.

Trading Frictions

Ignore slippage and commissions for now. Introducing these factors would add complexity without a clear directive. If you want to incorporate realistic trading costs (e.g., $10 per trade, 0.1% slippage), specify the parameters.

Benchmark

Compare the strategy to the S&P 500 index (SPY) as the default benchmark. This provides a clear reference for relative performance. If you prefer an alternative benchmark (e.g., Russell 2000), state it.

Proceed with these defaults unless adjustments are requested.