The Standard and Poor’s 500 is abbreviated as the S&P 500, is a stock market index that tracks the stock performance of 500 major listed firms on US stock exchanges. It is one of the most popular equity indices.
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- How S&P 500 is calculated?
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S&P 500 Market Cap Example
Individual market weights must be computed by dividing the market cap of each business by the total market cap of the index in order to understand how the underlying companies impact the S&P index. Here’s an example of how Apple is weighted in the index:
- In October 2021 annual report, Apple Inc. (AAPL) reported having 16.71 billion basic common shares issued. As of February 15, 2022, the stock price of AAPL was $173.
- As of February 15, 2022, Apple’s share price was $2.82 trillion (16.32 billion times $173). The $2.82 trillion is used as the numerator for calculating the index.
- As of January 31, 2022, the share price of all the stocks that make up the S&P 500 index totaled over $40.15 trillion.
- In the index, Apple accounted for around 7% of the total weight, or $2.82 trillion out of $40.15 trillion.
Bottom Line
The S&P 500 Index is a popular stock market index in the United States. These 500 firms represent the largest and most liquid enterprises in the United States, ranging from technology and software firms to banks and manufacturers. Despite the fact that the index is developed by a private firm, the S&P500 is now a prominent gauge for the overall performance of the market economy.