Market capitalization-based portfolio weighting in BorsaIstanbul: A comparative analysis of historical performanceagainst established benchmarks

This thesis examines the medium- to long-term performance of market-capitalization-weighted portfolios covering the entire Borsa Istanbul equity universe, adjusted for free-float shares and rebalanced at varying frequencies (1-day to 8-week). Using a comprehensive dataset spanning January 2011 to October 2024 with daily prices and actual free-float ratios, the study evaluates whether such portfolios can outperform benchmarks like BIST~30 and BIST~100. A total of 754 simulations per configuration enables robust comparisons across horizons from 12 to 172 months. Results indicate that full-market portfolios, when dynamically rebalanced, tend to outperform benchmarks in median and upper-quartile returns from the 24-month horizon onward. However, this advantage is limited in scale and does not yield significantly higher cumulative returns. Despite a nearly fifty-fold increase in total market capitalization, the portfolios captured only a modest portion and consistently underperformed the gold benchmark (XAUTRY) over long horizons. Risk metrics such as Sharpe Ratios and Maximum Drawdowns support these findings, with 10-day to 2-week rebalancing frequencies showing better risk-adjusted performance. The methodology avoids biases like overfitting, calendar effects, and survivorship. Overall, broader, systematically rebalanced portfolios appear to offer viable long-term alternatives to conventional Turkish equity benchmarks.