{"id":3862,"date":"2023-03-18T17:44:29","date_gmt":"2023-03-18T17:44:29","guid":{"rendered":"https:\/\/fisdomdevel.wpengine.com\/glossary\/capitalization-weighted-index\/"},"modified":"2023-03-18T17:44:29","modified_gmt":"2023-03-18T17:44:29","slug":"capitalization-weighted-index","status":"publish","type":"post","link":"https:\/\/www.fisdom.com\/glossary\/capitalization-weighted-index\/","title":{"rendered":"Capitalization Weighted Index"},"content":{"rendered":"<p>\nIt is an index in which weightage of a stock is established by its total market capital. Any change in the price of the share will bring a change in its weighted contribution to the index as well. It is also called Market value-weighted Index<br \/>\nMarket capital or capitalisation = No of outstanding shares x Current price<br \/>\nThus, larger the market cap, the larger is its weight on the index.<\/p>\n<h2>Features of Capitalization Weighted Index<\/h2>\n<p>Features of Capitalization Weighted Index are:<br \/>\n1. Companies with higher market caps will have higher weightage in the index.<br \/>\n2. Small or Mid caps will have lesser impact.<br \/>\n3. Most of the big indexes use the Capital Weighted Index mechanism.<\/p>\n<h2>Advantages of Capitalization Weighted Index<\/h2>\n<p>Advantages of Capitalization Weighted Index are:<br \/>\n1. Well established blue chip stocks have a greater weightage and these promote stability and lower volatility on Index.<br \/>\n2. It gives a stock&#8217;s relative value.<\/p>\n<h2>Disadvantages of Capitalization Weighted Index<\/h2>\n<p>Disadvantages of Capitalization Weighted Index are:<br \/>\na) A huge rise in price can have an outsized impact on the index.<br \/>\nb) Investors buying Index based Mutual Funds or Exchange Traded Funds (ETFs)  will have disproportionate exposure to some stocks.<\/p>\n<h2><\/h2>\n<h2><\/h2>\n","protected":false},"excerpt":{"rendered":"<p>It is an index in which weightage of a stock is established by its total market capital. Any change in the price of the share will bring a change in its weighted contribution to the index as well. It is also called Market value-weighted Index Market capital or capitalisation = No of outstanding shares x [&hellip;]<\/p>\n","protected":false},"author":67,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[11],"tags":[],"class_list":["post-3862","post","type-post","status-publish","format-standard","hentry","category-stocks"],"_links":{"self":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/posts\/3862","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/users\/67"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/comments?post=3862"}],"version-history":[{"count":0,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/posts\/3862\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/media?parent=3862"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/categories?post=3862"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fisdom.com\/glossary\/wp-json\/wp\/v2\/tags?post=3862"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}