How to Calculate Share Index

by Susan Reynolds

A share price index tells you how well a particular segment of stocks is doing. Well-known indices include the Dow Jones Industrial Average, the S&P 500, and the Wilshire 5000. There are actually indices for almost every sector of the economy. You can track a share's index by using the most current stock prices and market divisors. Indices are also published online and in newspapers.

Market Cap Weighted Index

Step 1

Find the market capitalization of each stock in the index by multiplying the price of the stock by the overall number of shares. For example, if a share is $5 and there are 500,000 of them, then 5 x 500,000 = $2.5 million market cap.

Step 2

Add the market caps together.

Step 3

Look up the official industrial averages divisor number, which is published daily in "The Wall Street Journal."

Step 4

Divide the sum of the market caps by the divisor. The answer is the share index average.

Price Weighted Index Calculation

Step 1

Look up the most current prices of the stock and write them down.

Step 2

Add the stock prices together.

Step 3

Divide the sum by the current Dow Jones divisor. The total is your index average.

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