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Weighted Average Market Cap

Marketing Communication

The Weighted Average Market Cap (Weighted Avg. MCap.) provides a measure of the average market capitalization of a group of stocks, where each stock's market capitalization is weighted by its proportion in the group.

The Weighted Average Market Cap – Calculation

The Weighted Average Market Cap is a metric that helps investors understand the ETF or portfolio's exposure to different-sized companies, which may influence risk and return characteristics.

To understand what the indicator is about we can break it down in this way:

  • Market Capitalization: This is the total value of a company's outstanding shares. It is calculated by multiplying the current share price by the total number of outstanding shares.
  • Weighting: Each stock in the group (such as an index or a portfolio) has a weight based on its market capitalization relative to the total market capitalization of all stocks in the group like an ETF or personal portfolio.


To calculate the Weighted Average Market Cap:

  1. Determine the Market Cap of Each Stock: calculate the market capitalization of each stock in the group.
  2. Determine the Total Market Cap of the Group:  sum all the market capitalization of each stock for the selected group.
  3. Calculate the Proportion of Each Stock: Divide each stock's market capitalization by the total market capitalization of the group.
  4. Multiply and Sum: Multiply each stock's market cap by its respective proportion and sum these values.


Here is a naïve example: 

Determine the Market Cap of Each Stock:
Determine the Total Market Cap of the Group:
Calculate the Proportion of Each Stock:
Multiply and Sum:

  • The Weighted Average Market Cap – Interpretation

The weighted average market cap tells us that larger companies, in terms of market cap, may have a bigger influence on the average than smaller companies. This method provides a realistic picture of the market by emphasizing the impact of companies based on their size, ensuring that the valuation is not skewed by smaller entities. By reflecting the actual market dynamics more accurately, it provides investors with a more comprehensive view of the investment landscape, allowing them to make better-informed decisions that consider the proportional significance of larger companies.

However, it's important to note that this indicator should be used alongside others to obtain a proper assessment of the market. Combining it with other financial metrics and analyses will yield a well-rounded perspective, helping investors to evaluate potential risks and opportunities more effectively.