What Does Weighted Average Market Capitalization Mean?
A stock market index weighted by the market capitalization of each stock in the index; in such a weighting scheme, larger market cap companies carry greater weight than do smaller market cap companies that are in the index. Most indexes are constructed in this manner, with the best example being the S&P 500. Investopedia explains Weighted Average Market Capitalization As an example, if a company’s market capitalization is $1 million and the market capitalization of all the stocks in the index is $100 million, the company is worth 1% of the index. The alternative to weighting by market cap is a price-weighted index such as the Dow Jones Industrial Average.
