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Market cap weighting is special. If company A has 500 shares, company B 500 also, than a fund that has 5 shares of A and 5 of B is market cap weighted.
by wbl 4mo ago
Market cap weighting is special. If company A has 500 shares, company B 500 also, than a fund that has 5 shares of A and 5 of B is market cap weighted.
- tionate 4mo agoThis is only true if those 500 shares had identical value, as market cap is the number of shares x the price.
- sobani 4mo agoThey do have identical value. 500 shares of company A is worth 100% of the market cap of company A. 500 shares of company B is also worth 100% of the market cap of company B. So if you have 5 shares of each, you'll have 1% of the market cap of each, even if one of those companies finds the cure for cancer or turns out to be a money furnace.
- malfist 4mo agoAnd what happens if company A issues more stock? Company B is delisted? Company C is now listed? Company A and C merge? Company A spins off it's most valuable side business into it's own independent listing company?
- wbl 4mo agoMost transactions just getting the results is all you need