Page 25 - FINAL CFA SLIDES DECEMBER 2018 DAY 13

Session Unit 13:
Market Capitalization Weighting, p.224
45. Security Market Indexes

For a market capitalization-weighted index, the base period market capitalization is (100,000 × $100) +
(1,000,000 × $10) + (20,000,000 × $1) = $40,000,000.

tanties

In the market capitalization-weighted index, the returns on Stock C have the greatest influence on
the index return because Stock C’s market capitalization is larger than that of Stock A or Stock B.