What is the difference between cap weight or value weight ? Thanks
Cap Weighted is tilted toward Large Cap stocks which will have the most influence on the index. Value weighted is tilted towards small to mid cap stocks which will have the greatest influence on the index
They’re the same thing.
With all due respect, you’re mistaken.
Cap-weighted and value-weighted are synonyms.
Thanks for help
My pleasure.
Is it possible that in one-off situations, they can be slightly different?
Page 142 Secret Sauce refers to NCREIF as being value-weighted and NAREIT as being cap-weighted.
My guess as to why is that to calculate a market-cap, you need to have shares outstanding, which a private investment technically wouldn’t have?
Market capitalization and market value are the same exact thing.
Yes, but the definition of market cap is share price multiplied by number of shares outstanding (publically traded).
Private investments don’t have outstanding shares, so you technically couldn’t calculate a market cap, even though they obviously still have a market value.
The definition of market capitalization is the market value of your capital. Valuation methods aside.
The shares x price you see in some examples is just but one awkward method of esitmating market cap, and a crude one at that.