O'Reilly logo

Winning with ETF Strategies: Top Asset Managers Share Their Methods for Beating the Market by Max Isaacman

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

4. Understanding Index-Weighting Choices

The S&P 500 Index was launched in 1957 and has grown to be the best known and most widely followed U.S. stock index in the world. Capitalization (cap) weighting is simple; it weights a company by the number of shares outstanding multiplied by the company’s market price. The effect of cap weighting is that the larger the company, the more effect it has on the index. Because a market cap is partly created by the price of the stock, the market is essentially valuing a company, which affects an index because of the weighting a company is given.

The cap-weighted method is more than 50 years old, and through the years, there have been critics of this method. Criticism includes that the market cap is related ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required