Human Capital Weighted Index?

[incognito_man]

Is there any data/effort on examining the human capital behind various indices and using that weighting for portfolio construction? A quick google search yields no results for my thought experiment:

A theory (with an illustrative example with made up numbers):
Let's say there are 3 indexes to weight inside a portfolio - Large Cap (LC), Mid Cap (MC) and Small Cap (SC) where each is currently constructed based on their dollar market cap (70/20/10 respectively). Traditional theory would say to hold them in your portfolio in a similar ratio - driven by monetary capital.

Let's also assume that, by human capital (say, measured in # of employees within each) the weights are: 40/30/30 - i.e. the money is more concentrated in the large caps, but human capital is more spread out.

Is there any argument (resiliency? risk?) of weighting one's portfolio with a human capital breakdown? Has this been researched before?

[stan1]

Is there any argument (resiliency? risk?) of weighting one's portfolio with a human capital breakdown? Has this been researched before?

Interesting thought. To me its pretty simple, I think the market brutally identifies and rewards innovation and productivity improvements carried out by a company's human capital capability as we see with Apple, Nvidia, and Tesla. Polaroid, Xerox, Magnavox, Sears, Chrysler all dealt with appropriately by the brutal market. Private equity has picked over the small and mid caps. Venture capital delays public trading of some potential innovators. So market capitalization gets this through a broad market fund, and if you must factors to the extent that profitability, quality, or momentum metrics might reflect innovation or just a solid group of people judiciously running a business.

[Walkure]

Is there any data/effort on examining the human capital behind various indices and using that weighting for portfolio construction? A quick google search yields no results for my thought experiment:

A theory (with an illustrative example with made up numbers):
Let's say there are 3 indexes to weight inside a portfolio - Large Cap (LC), Mid Cap (MC) and Small Cap (SC) where each is currently constructed based on their dollar market cap (70/20/10 respectively). Traditional theory would say to hold them in your portfolio in a similar ratio - driven by monetary capital.

Let's also assume that, by human capital (say, measured in # of employees within each) the weights are: 40/30/30 - i.e. the money is more concentrated in the large caps, but human capital is more spread out.

Is there any argument (resiliency? risk?) of weighting one's portfolio with a human capital breakdown? Has this been researched before?

I doubt it really has anything to do with size per se. What you will end up with is a gaggle of sector funds. A tech company can probably justify a trillion dollar valuation on 1/100th the number of employees that an automaker or consumer staple goods company needs.

edit to add: https://www.liberatedstocktrader.com/sp ... employees/ shows market cap per employee for the entire S&P 500. It's a big range; from about $200k at the bottom of the list to over $18m at the top. As you would expect, finance, energy/resource extraction, and tech is near the top while retail, airlines/logistics and services are at the bottom. So you'd end up holding large positions in things like Walgreens, American Airlines, and Accenture. I'm not sure that those industries have any compelling investment thesis that would justify overweighting them, or even really anything in common with each other apart from being employee-intensive.