Overweight (stock market)
Encyclopedia
Overweight is part of a three-tiered rating system, along with "underweight
" and "equal weight", used by financial analyst
s to indicate a particular stock's attractiveness. If a stock is recommended to be "overweight", the analyst opines that the stock is a better value for money than others.
In a portfolio, overweight indicates that an investor holds proportionately more than the benchmark weight of a certain asset
(a share, bond, industry/sector, country, currency or asset class etc.).
by market value, i.e. the weight of the Technology sector in the index is 10%.
Overweight — Suppose that an investor holds 15% of his/her investment in Technology stocks then, the investor's stock portfolio is 5% overweight in Technology stocks.
Suppose further that the investor is advised by his broker or financial advisor that Technology should be "overweight" then, the investor is being advised to hold more investments in Technology, as a percentage, than the weight of that asset in the index/market. i.e., more than 10% by value of Technology shares in this example.
Underweight — In contrast to overweight holding, if the broker advises that Technology should be "underweight", the recommendation to the investor is to hold less than 10% by value of Technology shares.
Equal weight - The third possibility is that the broker advises that Technology should be "equal weight" in which case, the recommendation is to hold 10% by value of Technology shares.
Underweight (stock market)
In financial markets, underweight is a term used when rating stock. A rating system may be three-tiered: "overweight", "equal weight" and "underweight", or five-tiered: "buy," "overweight," "hold," "underweight," and "sell"....
" and "equal weight", used by financial analyst
Financial analyst
A financial analyst, securities analyst, research analyst, equity analyst, or investment analyst is a person who performs financial analysis for external or internal clients as a core part of the job.-Job:...
s to indicate a particular stock's attractiveness. If a stock is recommended to be "overweight", the analyst opines that the stock is a better value for money than others.
In a portfolio, overweight indicates that an investor holds proportionately more than the benchmark weight of a certain asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...
(a share, bond, industry/sector, country, currency or asset class etc.).
Examples
Suppose that Technology stocks make up 10% of the relevant stock indexStock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
by market value, i.e. the weight of the Technology sector in the index is 10%.
Overweight — Suppose that an investor holds 15% of his/her investment in Technology stocks then, the investor's stock portfolio is 5% overweight in Technology stocks.
Suppose further that the investor is advised by his broker or financial advisor that Technology should be "overweight" then, the investor is being advised to hold more investments in Technology, as a percentage, than the weight of that asset in the index/market. i.e., more than 10% by value of Technology shares in this example.
Underweight — In contrast to overweight holding, if the broker advises that Technology should be "underweight", the recommendation to the investor is to hold less than 10% by value of Technology shares.
Equal weight - The third possibility is that the broker advises that Technology should be "equal weight" in which case, the recommendation is to hold 10% by value of Technology shares.