Question 20
Most major indexes (like the S&P 500) are market-cap weighted, meaning each company's weight in the index equals its market capitalization divided by the total cap of all constituents. That method naturally gives the largest companies the biggest influence on index returns -- which can concentrate risk if a few mega-cap firms dominate performance. Understanding weighting helps investors interpret index behavior and why different index rules (equal-weight, fundamental-weight) can produce different outcomes.
Which statement is true about a market-cap-weighted index?
Did You Also Know...
By Wise Wallet
Paper money experiments began in China and by the Song dynasty (around the 11th century) paper currency was widely used.