Capitalization-Weighted Index

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Capitalization-Weighted Index

A stock index which is computed by adding the capitalization (float times price) of each individual stock in the index, and then dividing by the divisor. The stocks with the largest market values have the heaviest weighting in the index. See also Float, Divisor.

Capitalization-Weighted Index

An index in which the price is determined by the price of individual stocks, weighted for total market value. For example, if the price of a component stock of the index changes, its effect on the index as a whole is proportionate to share's price multiplied by the number of shares the company has outstanding. This means that changes in price will affect the index more if the component company has greater value. Most non-American market value-weighted indices give further weighting (called float-weighted indexing) to properly account for partial government ownership of many large corporations. This method of index weighting contrasts with a price-weighted index, in which all price changes are weighted differently, and a market share-weighted index, which weights only by the number of shares outstanding and not by their value. Major examples of a market value-weighted index include the NASDAQ Composite Index and the Standard & Poor's 500. The latter uses float-weighted indexing to match its calculations more closely with foreign counterparts.
References in periodicals archive ?
The index family will include an equal weighted index and other weighting methodologies that will provide alternatives to market capitalization weighted indices.
KOSPI 200 Index ETF, which composes of 200 constituent stocks of the KOSPI with greater capitalization, is constructed by KRX and belongs to the market capitalization weighted stock index.
7 percent, the NIC-50 - a market capitalization weighted index which tracks the 50 most traded KSE-listed companies, rose by 196.
OTCQX30 is a rules-based index that is market capitalization weighted, adjusted for free float, with various liquidity screens to ensure tradability.
The S&P AFE 40 uses a capped market capitalization weighted index scheme, where the maximum weight of any constituent cannot exceed 10 percent of the index and the maximum weight for each country, based on domicile, cannot exceed 35 percent.
They also will be fully rebalanced each June when Russell reconstitutes its global family of market capitalization weighted indexes.
OTC Markets said that OTCQX30 is a rules-based index that is market capitalization weighted, adjusted for free float, with various liquidity screens to ensure tradability.
The First Trust Composite Closed-End Fund Index is a composite index of the municipal, taxable fixed income and equity indexes which is intended to provide a capitalization weighted representation of the entire U.
Both indices were developed in response to the market's growing demand for non-market capitalization weighted versions of the S&P Europe 350.
market capitalization weighted benchmark index made up of the securities of 400 companies in diverse industries.
In contrast to capitalization weighted indexes, the WisdomTree Indexes anchor the initial weights of individual stocks to a measure of fundamental value.
Lavine added, "We are pleased that industry analysts, peers and investors are taking note of our challenge to traditional market capitalization weighted indexing.