Value of Price Return Index

In the formula:

ni - the number of units of constituent security held in the index portfolio

Is that just the total number of issued shares for security i? So you’re effectively calculating the market cap for the security? Is this number ever different to the total number of issued shares in the context of indices?

It doesn’t appear to be. It appears that the creators of the index can choose the number of shares of each constituent stock in whatever manner they want.


I think I understand now. Indices can be price weighted, equal weighted, market-cap weighted (in which case we do what I suggested in the OP) and fundamentally weighted!