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 ?
All these indexes are float market capitalization-weighted indexes and are quoted in U.
Those companies feature prominently in healthcare ETFs targeting the pharmaceutical industry, as well as other large-cap or broad-market ETFs and mutual funds that are based on market capitalization-weighted indexes, so the potential for overlap with other holdings is large.
The two are the TOPIX 1000 and the Tokyo Stock Exchange Mothers Index, both of which are market capitalization-weighted indexes, the TSE said.
CRSP's broadly diversified, capitalization-weighted indexes meet Vanguard's "best practice" standards for market benchmarks and will help enable the company to deliver significant value to index fund and ETF shareholders through lower expense ratios over time.
The Russell Fundamental Index([R])Series aims to provide a cost-efficient alternative to active management, adding another distinctive facet to Russell's already robust offering of market capitalization-weighted indexes.
Using an index-based approach, the Russell Fundamental Index([R])Series aims to provide a cost-efficient alternative to active management, adding another distinctive facet to Russell's already robust offering of market capitalization-weighted indexes.
The Russell Fundamental Index Series aims to provide a cost-efficient alternative to active management through an index-based approach, adding another distinctive facet to Russell's already robust offering of market capitalization-weighted indexes.
Bundy added that today's announcement, which continues Russell's long track record of innovative index launches, doesn't change the firm's belief that Russell's market capitalization-weighted indexes remain the best description of the investable opportunity set and thus the most appropriate benchmarks.
But for all their benefits, capitalization-weighted indexes suffer a structural flaw that leads to overweighting overpriced securities and underweighting underpriced securities.
In contrast to capitalization-weighted indexes, the WisdomTree Indexes anchor the initial weights of individual stocks to a measure of fundamental value.
In addition to offering investors exposure to a traditionally difficult to access market, EPI will do so through a fundamentally weighted indexing strategy that seeks to reduce the potential risks that WisdomTree believes are associated with investing in Emerging Markets through market capitalization-weighted indexes.