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Capitalization Method |
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Capitalization method A method of constructing a replicating portfolio in which the manager purchases a number of the most highly capitalized names in the stock index in proportion to their capitalization. Capitalization Method A method of building a portfolio in which one enters a long position on the securities in some benchmark index in proportion to each security's market capitalization. For example, if the benchmark index has three stocks in it (one representing 50% of the capitalization of the index and the other two each representing 25%) 50% of a portfolio using the capitalization method would be composed of the first stock, while the rest would be equally divided between the other stocks. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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