S & P 500 Index

D TANDON
• The S&P 500 is a stock market index containing the stocks of 500 American Large-
Cap corporations. The index is owned and maintained by Standard & Poor's, a
division of McGraw-Hill. All of the stocks in the index trade on the two largest US
stock markets, the New York Stock Exchange and Nasdaq. The 
Dow Jones Industrial Average and the S&P 500 are the most widely watched
indexes of large-cap US stocks. The S&P 500 is often quoted using the symbol SPX
or INX, and may be prefixed with a caret (^) or with a dollar sign ($) Additionally,
the S&P 500 index is often used as a baseline level of performance against which
mutual funds and other asset managers' performance is measured.
 S & P Index
• The S&P 500 index is not made up of the 500 largest corporations in the U.S., since other factors such as liquidity of the
stock and industry grouping are also considered in selecting members for the index.The criteria for being added to the index
are as follows:
• Must be a "U.S. company". This is determined by looking at location of company's operations, its corporate structure, its
accounting structure and its exchange listing.
• Must have minimum $5 billion market capitalization. The minimum is reviewed occasionally to ensure that it takes in to
account market conditions.
• Must have a minimum public float of 50%, which means that at least half of the company's share must be publicly tradable.
• Must be financially viable. Companies are expected to have at least four consecutive quarters of positive as-reported
earnings
• Must be operating companies. Closed-end funds, holding companies, partnerships, investment vehicles and royalty trusts
are not eligible while Real Estate Investment Trusts (REITs) and business development companies (BDCs) are eligible for
inclusion to the index.
• Should have adequate liquidity and moderate price per share. The ratio of annual dollar value traded to market
capitalization for the company should be 0.30 or greater. Very low or extremely high priced shares are also considered to be
illiquid.
• the index must remain reflective of the various sectors in the U.S. economy. This signifies that even if a company has all
the qualifying characteristics, it may not be selected if the sector it operates in is already accounted for in the index.
• It should be noted that these criteria are applicable to companies that are being added to the S&P 500. Since the index
committee attempts to minimize unnecessary turnover in index membership, existing companies do not have to diligently
maintain these conditions to remain in the index. However, companies that substantially violate one or more of these criteria
are removed from the index and replaced by a new company. As a result, on a year-to-year basis, the composition of the index
only changes slightly.
• The Standard & Poor's 500 Index is calculated using a base-weighted
aggregate methodology; that means the level of the Index reflects the
total market capitalization of all 500 component stocks relative to a
particular base period. The S&P 500's base period is 1941-43. The actual
total market value of the stocks in the Index during the base period has
been set equal to an indexed value of 10. This is often indicated by the
notation 1941-43=10.
• In practice, the daily calculation of the Standard & Poor's 500 Index is
computed by dividing the total market value of the 500 companies in the
Index by a number called the Index Divisor. By itself, the Divisor is an
arbitrary number. However, in the context of the calculation of the S&P
500 Index, it is the only link to the original base period value of the Index.
The Divisor keeps the Index comparable over time and is the
manipulation point for all Index Maintenance adjustments