Standard & Poor's 500 Index (S&P 500) is a stock index, which tracks changes in the value of a hypothetical portfolio of 400 industrial stocks, 40 utility stocks, 20 transportation companies stocks and 40 financial institutions stocks. The total of 500 different stocks is weighted proportionally to each stock's market capitalization relatively to a particular base period. S&P 500 Index accounts for the 80% of the total market capitalization of the New York Stock Exchange (NYSE), while two contracts on S&P 500 are traded on the Chicago Mercantile Exchange (CME).
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The base-weighted aggregate methodology used by S&P 500 is a set of combined variables, namely price and number of shares. By multiplying the stock price by the number of common shares outstanding, investors may calculate the market capitalization of a company. Then, they find the corresponding indexed number, which represents the results of each calculation and they can understand how the Index tracks the particular stock over time.
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