Float-Adjusted Market Capitalisation Index Calculator

Float-Adjusted Market Capitalisation Formula:

\[ w_i = \frac{(f_i \times Q_i \times P_i)}{\sum_{x=1}^{N}(f_x \times Q_x \times P_x)} \]

Fraction of Shares Outstanding (f):

Number of Shares Outstanding (Q):

Price of the Security (P):

USD

Number of Securities in Index (N):

Sum of Other Securities (∑):

USD

Float-Adjusted Weight (w):

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1. What is Float-Adjusted Market Capitalisation?

Float-Adjusted Market Capitalisation refers to a method of calculating the total market value of a company's outstanding shares, where only the freely tradable shares are considered. This approach provides a more accurate representation of a company's market value available for public trading.

2. How Does the Calculator Work?

The calculator uses the Float-Adjusted Market Capitalisation formula:

\[ w_i = \frac{(f_i \times Q_i \times P_i)}{\sum_{x=1}^{N}(f_x \times Q_x \times P_x)} \]

Where:

\( w_i \) — Weight of security i in the index
\( f_i \) — Fraction of shares outstanding for security i
\( Q_i \) — Number of shares outstanding of security i
\( P_i \) — Price of security i
\( N \) — Number of securities in the index
\( \sum \) — Summation of all securities in the index

Explanation: The formula calculates the proportional weight of a security in an index based on its float-adjusted market capitalization relative to the total float-adjusted market capitalization of all securities in the index.

3. Importance of Float-Adjusted Calculation

Details: Float-adjusted market capitalization provides a more accurate representation of a company's market value by excluding shares that are not available for public trading, such as those held by insiders, governments, or other restricted holders.

4. Using the Calculator

Tips: Enter the fraction of shares outstanding (0-1), number of shares outstanding, current price, total number of securities in the index, and the sum of other securities' float-adjusted market capitalizations.

5. Frequently Asked Questions (FAQ)

Q1: Why use float-adjusted market cap instead of full market cap?
A: Float-adjusted market cap provides a more accurate representation of the shares available for public trading, making it more relevant for index construction and investment analysis.

Q2: How is the fraction of shares outstanding determined?
A: The fraction is typically calculated by excluding restricted shares, insider holdings, and other non-tradable shares from the total outstanding shares.

Q3: What are typical values for the fraction of shares outstanding?
A: Most companies have float fractions between 0.5 and 0.9, though this can vary significantly depending on ownership structure.

Q4: How often should float adjustments be made?
A: Float adjustments should be reviewed regularly, typically quarterly, to account for changes in ownership structure and share availability.

Q5: Does this calculation method work for all types of indices?
A: Yes, float-adjusted market capitalization is widely used in various equity indices, including major global indices like S&P 500 and MSCI indices.