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The S&P Composite 1500®: An Efficient Measure of the U.S. Equity Market What separates the S&P 1500 from other U.S. equity indices?
BY Hamish Preston

Launched in 1995, the S&P Composite 1500 (hereafter the “S&P 1500”) serves as a benchmark indicator for U.S. equity market performance, aggregating price movements of S&P 500®, S&P MidCap 400®, and S&P SmallCap 600® constituents to deduce common return drivers.

The S&P 1500 also increasingly serves as a basis for constructing portfolios designed to deliver a “market” return at lower cost than those active managers who offer to beat it. We shall examine the S&P 1500 from both perspectives, as well as examining its merits in comparison to popular alternatives. In particular, we observe that:

• The sizeable representation of U.S. companies means tracking U.S. equity market performance may be relevant to investors, globally;

• The S&P 1500 has outperformed the S&P 500, historically;

• Incorporating smaller companies in a U.S. market benchmark provides a more holistic view of the U.S. economy (see Exhibit 7); and

• Compared with other U.S. equity market indices, the S&P 1500 avoids relatively illiquid, lower priced, and lower quality stocks (see Exhibit 1).

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