Capitalization-weighted index
A capitalization-weighted (or "cap-weighted") index, also called a market-value-weighted index is a whose components are according to the total market value of their outstanding shares. Every day an individual stock's price changes and thereby changes a stock index's value. The impact that individual stock's price change has on the index is proportional to the company's overall market value (the share price multiplied by the number of outstanding shares), in a capitalization-weighted index. In other types of indices, different ratios are used.
For example, the Composite Index (XAX) had more than 800 component stocks. The weighting of each stock constantly shifted with changes in the stock's price and the number of shares outstanding. The index fluctuates in line with the price move of the stocks.
Stock market indices are a type of economic index.
The formula underneath is a simple way of seeing the percent changes that your ETF (or any other shares of stock, for that matter) has gained (or lost). If an investor purchases 100 shares of AAPL at $1.00 and a month later the purchased AAPL is trading at $1.10, the investment yielded a 10% gain/return (($110/$100)-1=0.1, or 10%).
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