Also referred to as a market-weighted index, a capitalization-weighted index is one in which a stock affects the index as a whole only in relation to its size (i.e. market capitalization).
The Standard & Poor’s 500 (S&P 500) is a capitalization-weighted index of 500 widely held stocks selected to be representative of the stock market as a whole.
Related Terms: Standard and Poor’s 500 Index – S&P 500 – Price-Weighted Index – Dow Jones Industrial Average (DJIA) – Price-Weighted Index – Dow Divisor