Cap weighted & value weighted

Cap Weighted is tilted toward Large Cap stocks which will have the most influence on the index. Value weighted is tilted towards small to mid cap stocks which will have the greatest influence on the index
 
mbjones21 wrote: Cap Weighted is tilted toward Large Cap stocks which will have the most influence on the index. Value weighted is tilted towards small to mid cap stocks which will have the greatest influence on the index
Click to expand...
With all due respect, you’re mistaken.
Cap-weighted and value-weighted are synonyms.
 
Is it possible that in one-off situations, they can be slightly different?
Page 142 Secret Sauce refers to NCREIF as being value-weighted and NAREIT as being cap-weighted.
My guess as to why is that to calculate a market-cap, you need to have shares outstanding, which a private investment technically wouldn’t have?
 
Yes, but the definition of market cap is share price multiplied by number of shares outstanding (publically traded).
Private investments don’t have outstanding shares, so you technically couldn’t calculate a market cap, even though they obviously still have a market value.
 
The definition of market capitalization is the market value of your capital. Valuation methods aside.
The shares x price you see in some examples is just but one awkward method of esitmating market cap, and a crude one at that.
 
You must log in or register to reply here.
Back
Top