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| | Myrtle Benny is how I'm called and I really feel comfortable when individuals use the complete name. Bookkeeping is what I do. The preferred pastime for my children and me is to play baseball and I'm trying to make it a occupation. Years in the past we moved to North Dakota and I love each working day living right here.<br><br>Visit my web site [http://www.pinaydiaries.com/user/LConsiden std testing at home] |
| A '''capitalization-weighted (or "cap-weighted") index''', also called a '''market-value-weighted index''' is a [[stock market index]] whose components are [[stock market index#Weighting|weighted]] according to the total [[market value]] of their [[Shares outstanding|outstanding shares]]. Every day an individual stock's price changes and thereby changes a stock index's value. The impact that individual stock's price change has on the index is proportional to the company's overall market value (the share price multiplied by the number of outstanding shares), in a capitalization-weighted index. In other types of indices, different ratios are used.
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| For example, the [[American Stock Exchange|AMEX]] Composite Index (XAX) had more than 800 component stocks. The weighting of each stock constantly shifted with changes in the stock's price and the number of shares outstanding. The index fluctuates in line with the price move of the stocks.<ref>John Downes & Jordan Elliot Goodman, ''Finance and Investment Terms'', Barrons Financial Guides, 2003</ref>
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| Stock market indices are a type of [[Index (economics)|economic index]].
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| ==Mathematical formulas==
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| <math>\frac{ index_{\rm_{new}}}{ index_{\rm_{old}}} = \frac{ \sum {\# shares} \cdot price_{\rm_{new}}}{ \sum {\# shares} \cdot price_{\rm{old}}}</math>
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| ==Free-float weighting==
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| A common version of capitalization weighting is the ''free-float'' weighting. With this method a ''float factor'' is assigned to each stock to account for the proportion of outstanding shares that are held by the general public, as opposed to "closely held" shares owned by the government, royalty, or company insiders (see [[Public float|float]]). For example, if for some stock 15% of shares are closely held, and the other 85% are publicly held, the float factor will be 0.85, by which the company's market capitalization will be multiplied before weighting its value against the rest of the index. In other words, the number of shares used for calculation is the number of shares "floating", rather than outstanding.
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| An index that is weighted in this manner is said to be "float-adjusted" or "float-weighted", in addition to being cap-weighted. For example, the [[S&P 500]] is both cap-weighted and float-adjusted.<ref>[[Wikinvest: How stock indices work|Market Cap calculations via Wikinvest]]</ref>
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| Traditionally, capitalization-weighted indices in the United States tended to have a full weighting, i.e., all outstanding shares were included; overseas, because partial government ownership of large companies was more common, so-called float-weighted indexing has been the norm for many non-U.S. indices. Recently, many of the U.S. indices, such as the S&P 500, have been changed to a [[Public float|float]]-adjusted weighting which makes their calculation more consistent with non-U.S. indices.
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| ==Other types of indices==
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| An index may also be classified according to the method used to determine its price. In a [[price-weighted index]] such as the [[Dow Jones Industrial Average]], the price of each component stock is the only consideration when determining the value of the index. Thus, price movement of even a single security will heavily influence the value of the index even though the dollar shift is less significant in a relatively high-value name. In a [[Fundamentally based indexes|fundamentally weighted]] index, stocks are weighted by fundamental factors like sales or book value.
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| ==Some capitalization-weighted indices==
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| *[[NASDAQ Composite]]
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| *[[NASDAQ-100]]
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| *[[NYSE Composite]]
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| *[[FTSE-100]]
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| *[[Hang Seng Index]] in Hong Kong
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| *[[RTS Index]]
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| *[[Russell 2000]]
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| *[[S&P 500]] - Now float-weighted
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| *[[S&P/ASX 200]] in Australia
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| *[[SENSEX]] in India
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| *[[Standard & Poor's]] 100 Index (OEX) - now float weighted
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| *[[IBEX 35]]- index comprising the 35 most liquid Spanish stocks traded in the continuous market, and is [[Bolsa de Madrid]]'s benchmark.
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| *[[Indice de Precios y Cotizaciones]] (IPC) - index of 35 of the [[Bolsa Mexicana de Valores]] (BMV) most highly marketable issuers with a minimum market value of $100 million; revised every six months.
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| *[[Kuala Lumpur Composite Index]] (KLCI)
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| *FTSE TechMark
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| *[[CAC 40]]
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| *VN-Index
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| *[[Taiwan Capitalization Weighted Stock Index]]
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| *[[MSCI EAFE]]
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| ==Notes==
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| <!-- Use MLA style citation format for books, encyclopedias, and periodicals -->
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| {{reflist}}
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| ==See also==
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| *[[Stock market index]]
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| *[[Index (economics)]]
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| *[[Index fund]]
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| *[[Index investing]]
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| *[[List of stock market indices]]
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| *[[Fundamental weighting]]
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| *[[Wikinvest: How stock indices work|Capitalization weighted methodology via Wikinvest]]
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| {{DEFAULTSORT:Capitalization-Weighted Index}}
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| [[Category:Business terms]]
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| [[Category:Stock market indices]]
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Myrtle Benny is how I'm called and I really feel comfortable when individuals use the complete name. Bookkeeping is what I do. The preferred pastime for my children and me is to play baseball and I'm trying to make it a occupation. Years in the past we moved to North Dakota and I love each working day living right here.
Visit my web site std testing at home