Books

Investing Glossary – Standard & Poor’s 500 (S&P 500)

The following is either adapted or copied from Wikipedia. Some small adjustments and additions have been made by Investor in the Family staff. For more, see our Investing Glossary.

The S&P 500, or the Standard & Poor’s 500, is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. The National Bureau of Economic Research has classified common stocks as a leading indicator of business cycles.

To calculate the value of the S&P 500 Index, the sum of the adjusted market capitalization of all 500 stocks is divided by a factor, usually referred to as the Divisor. For example, if the total adjusted market cap of the 500 component stocks is US$13 trillion and the Divisor is set at 8.933 billion, then the S&P 500 Index value would be 1,455.28. Although the adjusted market capitalization of the entire index can be accessed from Standard & Poor’s website, the Divisor is considered to be proprietary to the firm. However, the Divisor ‘s value is approximately 8.9 billion

 

Print Friendly

Leave a Comment