The S&P 500 is a market-capitalization-weighted index of 500 large publicly traded companies in the United States. The index is calculated by taking the sum of the market capitalizations of all 500 companies and dividing that by a divisor, which is a proprietary number designed to adjust for changes in the market value of the companies over time.
To calculate the market capitalization of a company, you multiply the number of shares outstanding by the current market price per share. For example, if a company has 100 million shares outstanding and the current market price is $50 per share, the market capitalization would be $5 billion.
The S&P 500 is a float-adjusted index, which means that the market capitalization of each company is adjusted to reflect only the shares that are available to the public for trading. This is done to ensure that the index is a true representation of the market value of the companies that it tracks.
The index is also weighted by market capitalization, meaning that companies with a higher market value have a greater impact on the index's performance. For example, a company with a market capitalization of $100 billion would have a greater impact on the index than a company with a market capitalization of $10 billion.
The S&P 500 is calculated and maintained by S&P Dow Jones Indices, which is a division of S&P Global. The exact methodology for calculating the index is proprietary and is not disclosed to the public.
