S&P 500 index

The weighted average of the prices of 500 fairly large companies.  If the S&P 500 index were calculated by taking the average of the prices of the 500 companies, it would represent what most people consider an “average.”  Instead, the S&P 500 index is calculated by first multiplying the price of each company by the number of shares outstanding for each company.  The result of this multiplication is the market capitalization or market cap of a company.  The index is calculated by taking the sum of the market caps and dividing by the total number shares of all of the companies.  As such, the S&P 500 index is a weighted average of the prices of the companies, where the weight given to each company is its number of shares outstanding.