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.

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