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==Composition of the S&P 500 Index== ==Composition of the S&P 500 Index==
-The S&P 500 index contains 500 large companies and tries to cover all major industries in the US. It is a market value weighted index, which means that the weighting for each stock is proportional to the market value of the company. However, the index is not made up of the 500 largest corporations, since other factors such as liquidity of the stock and industry grouping are considered in the selection. The companies are chosen by a team of analysts and economists at [[Standard & Poor's]].+The S&P 500 index contains 500 large-cap companies, primarily based in the U.S., and tries to cover all major industries in the U.S. economy. The companies are chosen by a team of analysts and economists at [[Standard & Poor's]].
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 +It is a market value weighted index, meaning weighting for each stock in the index is proportional to the market value of the company. However, the index is not made up of the 500 largest corporations, since other factors such as liquidity of the stock and industry grouping are also considered in calculating the index value. For example, [[Berkshire Hathaway]] is not included in the S&P 500 index since it does not meet the liquidity requirements. Similarly, before [[Altria]] divested its [[Kraft Foods]] holdings, [[Kraft Foods]] was not included in the index in order to prevent double counting -- even though both companies were traded publicly.

Revision as of 18:04, August 27, 2008

The S&P 500 is a stock market index containing the stocks of 500 Large-Cap corporations, most of which are American. The index is the most notable of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 is used in reference not only to the index but also to the 500 actual companies, the stocks of which are included in the index.

The S&P 500 index forms part of the broader S&P 1500 and S&P Global 1200 stock market indices.

All of the stocks in the index are those of large publicly held companies and trade on the two largest US stock markets, the New York Stock Exchange and Nasdaq. After the Dow Jones Industrial Average, the S&P 500 is the most widely watched index of large-cap US stocks. It is considered to be a bellwether for the US economy and is a component of the Index of Leading Indicators. It is often quoted using the symbol SPX or INX, and may be prefixed with a caret (^) or with a dollar sign ($).

Many index funds and exchange-traded funds track the performance of the S&P 500 by holding the same stocks as the index, in the same proportions, and thus attempting to match its performance (before fees and expenses). Partly because of this, a company which has its stock added to the list may see a boost in its stock price as the managers of the mutual funds must purchase that company's stock in order to match the funds' composition to that of the S&P 500 index.

In stock and mutual fund performance charts, the S&P 500 index is often used as a baseline for comparison. The chart will show the S&P 500 index, with the performance of the target stock or fund overlaid.

Composition of the S&P 500 Index

The S&P 500 index contains 500 large-cap companies, primarily based in the U.S., and tries to cover all major industries in the U.S. economy. The companies are chosen by a team of analysts and economists at Standard & Poor's.

It is a market value weighted index, meaning weighting for each stock in the index is proportional to the market value of the company. However, the index is not made up of the 500 largest corporations, since other factors such as liquidity of the stock and industry grouping are also considered in calculating the index value. For example, Berkshire Hathaway is not included in the S&P 500 index since it does not meet the liquidity requirements. Similarly, before Altria divested its Kraft Foods holdings, Kraft Foods was not included in the index in order to prevent double counting -- even though both companies were traded publicly.

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