I have been an advocate of equal weighted portfolios essentially since the original study by de Miguel and others was published as a working paper in 2006. I have argued for more than 15 years, once you take uncertainty about future returns of assets into account, an equal-weighted portfolio is almost impossible to beat in the long run.
Equal weighted indexes contain an embedded "buy low, sell high" strategy in their periodic rebalances, which contribute significantly.
Joachim you say that :
"On the other hand, equal-weighted portfolios benefit from their higher allocation to highly profitable companies."
But why does an equal cap weighted set up mean a higher allocation to profitable companies? When the only consideration is putting the same amount of funds into all the stocks in a benchmark ?
What am I missing?
If you like equal weight you'll love inverse weight (YPS)