Wednesday, December 29, 2010

Market Capitalization

The market capitalization (or "market cap") of a stock is simply the number of outstanding shares multiplied by the current market prices. In essence it tells you how much in total the market is valuing the company. Market capitalisation is a useful concept to know because there are specific investment styles which invest in companies with a market cap in a certain range, e.g. Large-cap on the one hand and Small-cap on the other. Market cap is also useful for considering indexes, as many indices determine component weightings based on market cap (or free float - which is the market cap adjusted for holders which are unlikely to sell e.g. strategic shareholdings etc).

Synonyms: Market cap, Large-cap, Mid-cap, Small-cap, Company size, Free float

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