Standard & Poor’s 500 stock market index

Definition

The Standard & Poor’s 500 (S&P 500) is a stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States. It is widely regarded as one of the best representations of the U.S. stock market and economy.

5 Must Know Facts For Your Next Test

1. The S&P 500 is often used as a benchmark for portfolio performance, comparing individual returns against the overall market.
2. It is capitalization-weighted, meaning companies with higher market caps have greater influence on the index's performance.
3. The S&P 500 includes companies from various sectors such as technology, healthcare, financials, and consumer discretionary.
4. Historically, it has shown a positive correlation with economic growth and investor sentiment.
5. Analysts use regression analysis to study its relationship with other financial variables like interest rates and GDP growth.

Review Questions

• What factors determine a company's weight in the S&P 500 index?
• How can regression analysis be used with the S&P 500 to understand its relationship with economic indicators?
• Why is the S&P 500 considered a good representation of the U.S. stock market?

Related terms

Market Capitalization: The total value of a company's outstanding shares of stock, calculated by multiplying the share price by the number of shares outstanding

Benchmark Index: A standard against which the performance of an investment portfolio can be measured, often represented by indices like the S&P 500

Correlation Coefficient: A statistical measure that describes the degree to which two variables move in relation to each other