Stock Price Charts

how weight of each stock in index is calculated?

how weight of each stock in index is calculated? if i am to calculate weight of each stock in portfolio, how should i do it? please do let me know as soon as possible?

Public Comments

1. Different indexes use different weighting techniques, but the most popular is to use market capitalization. That means they take the total value of the outstanding shares time the market price. I think that XOM has the largest market capitalization currently so it would make up the largest % of a portfolio such as the S&P 500 which is an index based on market capitalization. For that index they calculate the total value of all 500 stocks and then each stock in the index and divide by the total to give the % for that stock. The Dow Jones uses a different methodology not based on market capitalization. Their method is too confusing to attempt to explain.