I read through the definition of S&P 500, there is no clear explanation of the Divisor.
I wonder what is it and where can I read more about it?
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2$\begingroup$ S&P500 is a market cap weighted index $\endgroup$ – noob2 Jul 13 '20 at 12:44
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$\begingroup$ @noob2 That is true, so? $\endgroup$ – Preston Lui Jul 13 '20 at 12:50
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1$\begingroup$ This link might help: finance.zacks.com/index-divisor-2407.html $\endgroup$ – Jan Stuller Jul 14 '20 at 7:56
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The divisor it is just a random fixed number. The current market cap of the SPX is around 25.64 trillions. The value of the SPX at the moment is 3,185.04 .
This means that the divisor is aroundL 25,640,000,000/3,185. But that number is completely irrelevant and has no economic meaning.
answered Jul 13 '20 at 12:59
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5$\begingroup$ Yes, if you want more details: The S&P company designed the current index in 1957. They scaled it so it would have the average value 10 over the period 1941-1943. An arbitrary decision, but they have kept consistency since then (as they must). Once an initial value is chosen it determines the scaling factor. $\endgroup$ – noob2 Jul 13 '20 at 13:13
