Capitalization Weighted Index

Capitalization Weighted Index - The capitalization weighted index is a stock index where each stock affects the stock market's index in proportion to its current market value. Examples of markets using the capitalization weighted index include the Nasdaq Composite Index, the S & P 500, the Wilshire 5000 Equity Index, the Hang Seng Index, and the EAFE Index. The capitalization weighted index is also referred to, and known as the market-value weighted index. This index is used by other stock markets and stock exchanges as well, and has been known to be very reliable for calculating how the stock's market value will affect the index.