The S&P TSX composite index is a capitalization weighted index of the Toronto Stock Exchange. It's the main index for the exchange and covers over 75% of the Toronto Stock Exchange by market capitalization. It includes all common stocks and income trust units traded on the exchange.
The index is calculated on the basis of the market capitalization method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by company insiders.
So the formula would be:
Index level= Σ(Price of stock* Number of shares)/ Index Divisor.
While one might track this portfolio’s value in dollar terms, it would probably be an unwieldy number – for example, the S&P 500 market value is roughly $11.8 trillion. Rather than deal with ten or more digits, the figure is scaled to a more easily handled number, currently around 1250. Dividing the portfolio market value by a factor, usually called the Index divisor, does the scaling.
Continuity in index values is maintained by adjusting the divisor for all changes in the constituents’ share capital after the base date. This includes additions and deletions to the index, rights issues, share buybacks and issuances, and spin-offs. The divisor’s time series is, in effect, a chronological summary of all changes affecting the base capital of the index. The divisor is adjusted such that the index value at an instant just prior to a change in base capital equals the index value at an instant immediately following that change.
To be eligilbile for inclusion in the Composite index :