Weighted Average Market Capitalization
A stock market index weighted by the market capitalization of each stock in the index. In such a weighting scheme, larger companies account for a greater portion of the index. Most indexes are constructed in this manner, with the best example being the S&P 500. Investopedia Says:
For example, if a company's market capitalization is $1 million and the market capitalization of all stocks in the index is $100 million, then the company would be worth 1% of the index. The alternative to weighting by market cap is a price-weighted index such as the Dow Jones Industrial Average. Related Terms:
Capitalization-Weighted Index
Equal Weight
Free-Float Methodology
Market Capitalization
Outstanding Shares
Price-Weighted Index
Standard & Poor's 500 Index - S&P 500
Unweighted Index |