What does index breadth as percent of total market cap mean?
why higher percentage implies more inclusion of illiquid securities in the index?
Seems a stupid question…my head stops thinking…mental block…
Thx
I believe what this refers to is Index breadth is the number of securities included. A higher percentage would have to include a higher number of small cap securities, which would be illiquid. For example, if market cap of all companies is $1 trillion, but the Dow Jones only captures the top 30, while the S&P has 500, but that 500 includes many with lower liquidity.
It’s a measure of covering the broad market, using the market cap as a divisor (from what I understand here)
So 500 stocks with a market cap of $1 trillion would have the roughly the same number of illiquid securities as 1,000 stocks with a market cap of $2 trillion.