Are there different methodologies in calculating the index?
Market Capital Index Most indexes are capitalization-weighted. Number of shares issued to outstanding multiplied by the market price of company s share determines its weightage in the index. The total of market capital of all shares in the index is linked to an index number. The shares with highest market capitalization are most influential in this type of index. Examples : S&P 500 Index in USA , BSE Sensex & S&P CNX Nifty in India. Modification 1 : The number used as outstanding shares is adjusted to reflect only those shares that are freely available for trade (floating stock) ignoring those shares which are not expected to be traded in the market (like promoters holding). Example RUSSEL 1000 Modification 2: It seeks to limit the influence of the largest stocks in the index, which otherwise would dominate the entire index. This is done by setting a limit on the percentage weight of the largest stock or a group of stocks. Example NASDAQ 100 Price Weighted Index This type of index sums
