Weighting Formula and Calculation of the S&P 500

stockstr · 发表于 2023-11-25 02:12:02

Weighting Formula and Calculation of the S&amp 500

The S&amp

500 uses a market-cap weighting method, giving a higher percentage allocation to companies with the largest market capitalizations.1

Company Weighting in S & P
=
Company market cap
Total of all market caps
Company Weighting in S & P=
Total of all market caps
Company market cap

Determining the weighting of each component of the S&amp

500 begins with adding up the total market cap for the index by adding together the market cap of every company in the index.

To review, the market cap of a company is calculated by taking the current stock price and multiplying it by the company's outstanding shares. Fortunately, the total market cap for the S&amp

500 as well as the market caps of individual companies are published frequently on financial websites, saving investors the need to calculate them.

The weighting of each company in the index is calculated by taking the company's market cap and dividing it by the total market cap of the index.2

Other S&amp

Indices
The S&amp

500 is a part of the S&amp

Global 1200 family of indices. Other indices included are the S&amp

MidCap 400, which represents the mid-cap range of companies, and the S&amp

SmallCap 600, which represents small-cap companies. The S&amp

500 , S&P MidCap 400, and S&P SmallCap 600 combine to cover 90% of all US capitalization in an index known as the S&P Composite 1500.34
S&P 500 Index Construction
The S&P only uses free-floating shares when calculating market cap, meaning the shares that the public can trade. The S&P adjusts each company's market cap to compensate for new share issues or company mergers. The value of the index is calculated by totaling the adjusted market caps of each company and dividing the result by a divisor. The divisor is proprietary information of the S&P and is not released to the public. The S&P Index (SPX) is not a total return index and does not include cash dividend gains for the companies listed.5
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However, you can calculate a company's weighting in the index, which can provide investors with valuable information. If a stock rises or falls, you can get a sense as to whether it might have an impact on the overall index. For example, a company with a 10% weighting will have a greater impact on the value of the index than a company with a 2% weighting.

The S&P 500 is one of the most widely quoted American indexes because it represents the largest publicly traded corporations in the US The S&P 500 focuses on the US market's large-cap sector and is also a float-weighted index (a type of capitalization weighting) , meaning company market caps are adjusted by the number of shares available for public trading.1

The S&P 500's most recent rebalancing was announced on Sep. 1, 2023, and took effect before markets opened on Sept. 18, 2023. Blackstone Inc. and Airbnb Inc. replaced Lincoln National Corp. and Newell Brands Inc., respectively.6

S&P 500 Competitors
S&P 500 vs. Dow Jones Industrial Average (DJIA)
Another common US stock market benchmark is the Dow Jones Industrial Average (DJIA). The S&P 500 is often the institutional investor's preferred index given its depth and breadth, while the DJIA has historically been associated with significant equities from the retail investor's point of view. Institutional investors perceive the S&P 500 as more representative of US equity markets because it comprises more stocks across all sectors (500 versus the Dow's 30).

Furthermore, the S&P 500 uses a market-cap weighting method, giving a higher percentage allocation to companies with the largest market caps, while the DJIA is a price-weighted index that gives companies with higher stock prices a higher index weighting. The market- cap-weighted structure tends to be more common than the price-weighted across US indexes.7

S&P 500 vs. Nasdaq
Nasdaq is a global electronic marketplace for trading securities. There are several equity market indexes that include stocks traded on Nasdaq. Note that a given stock included in the S&P 500 Index may also be in one or more of the various Nasdaq indexes.

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Among the most-watched Nasdaq stock indices are the:

Nasdaq 100 Index, which includes 100 of the largest, most actively traded common equities listed on Nasdaq.
Nasdaq Composite Index, which the media often simply refers to as the Nasdaq (and which includes more than 2,500 common stocks that trade on Nasdaq).
Nasdaq Global Equity Index (NQGI), which includes international stocks.
PHLX Semiconductor Sector Index (SOX), which is the leading barometer of stocks related to the semiconductor industry.
OMX Stockholm 30 Index (OMXS30), which includes 30 actively traded stocks on the Stockholm Stock Exchange.8
S&P 500 vs. Russell Indexes
The S&P 500 is a member of a set of indexes created by Standard & Poor's. The Standard & Poor's set of indexes is like the Russell index family in that both are market-cap-weighted indexes unless stated otherwise (as in the case of equal -weighted indexes, for example).