To find the value of a capitalization-weighted index, first multiply each component's market price by its total outstanding shares to arrive at the total market value. The proportion of the stock's value to the overall total market value of the index components provides the weighting of the company in the index.
What is the formula for weighted index?
PWI Formula = Sum of Members Stock Price in Index / Number of Members in the Index.
How do you calculate market cap-weighted average?
The weighted average market capitalization is calculated by multiplying the existing market price with the number of shares outstanding, and then considering an average for the purpose of knowing weight. For instance, the total market capitalization of stocks in an index is $100 million.
What is a cap weighted index fund?
Market cap—or market capitalization—refers to the total value of all a company's shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a market cap of $1 billion.