A small number of shares control a big percentage
The e-mini S&P 500 contract (ticker symbol: ES) which we predominately trade here is a futures contract based on the S&P 500 cash index calculated by the CBOE.
On 15 July 2004 I took a look at the index and thought that this
information would be of value to traders of the ES.
The top 10 stocks by market value (i.e. 2% of the index by number) have a 22% weighting on the index. Because this index is a value weighted index (unlike the DJIA which is a price weighted index), movements in the larger stocks will have a greater impact on movements in the underlying index. At the time of writing this (15 July 2004) the top ten stocks in this index (in market value order) were:
|Exxon Mobil Corp.||2.77%|
|American Int'l. Group||1.77%|
|Bank of America Corp.||1.63%|
|Johnson & Johnson||1.56%|
The second column shows the % weighting they have in the S&P 500 index.
So a 1% change in the price of General Electric will have about double the impact on the value of the S&P 500 cash index as a 1% change in Johnson & Johnson. This translates to equally to the lower weighted stocks in this index.
This is a note from the NYSE about the S&P 500:
A capitalization weighted index of 500 stocks. The index is a standard by which investors measure the performance of the large cap US stock market. The 500 stocks of this index are selected for being a representative sample of leading companies in leading industries. Many money managers index their portfolios to match the S&P 500, so the return on their investments keep pace with the performance of the index.