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A capitalization-weighted (or cap-weighted) index, also called a market-value-weighted index is a stock market index whose components are weighted according to the total market value of their outstanding shares. Every day an individual stock's price changes and thereby changes a stock index's value.
$500 x 20,000,000 = $10,000,000,000 market capitalization. Again, that’s the price of one share multiplied by the total number of outstanding shares. ... “Most index funds today are weighted ...
Stock market indices may be categorized by their index weight methodology, or the rules on how stocks are allocated in the index, independent of its stock coverage. For example, the S&P 500 and the S&P 500 Equal Weight each cover the same group of stocks, but the S&P 500 is weighted by market capitalization, while the S&P 500 Equal Weight places equal weight on each constituent.
Many professionals [who?] consider it to be an inadequate representation of the overall U.S. stock market compared to a broader market index such as the S&P 500. The DJIA includes only 30 large companies. It is price-weighted, unlike other common indexes such as the Nasdaq Composite or S&P 500, which use market capitalization. [4] [5] [6] [7]
The Dow Jones Industrial Average is a price-weighted index. ... has the largest weight in the market-cap-weighted S&P 500 based on its market cap of $3.35 trillion. But in the Dow, it has just the ...
Today, Apple has a market cap of $2.59 trillion. That’s more value than the entire economic output (GDP) of all but six countries in the world — the U.S., China, Japan, Germany, India and the U.K.
Adjustment Factor = Index specific constant "Z" / (Number of shares of the stock * Adjusted stock market value before rebalancing) A stock trading at $100 will thus be making up 10 times more of the total index compared to a stock trading at $10. The Dow Jones Industrial Average and Nikkei 225 are examples of price-weighted stock market indexes.
Market cap is given by the formula =, where MC is the market capitalization, N is the number of common shares outstanding, and P is the market price per common share. [ 8 ] For example, if a company has 4 million common shares outstanding and the closing price per share is $20, its market capitalization is then $80 million.