Hi Thomas,
I think you might be off by a decimal:
0.015×30 = 0.45% (less than a half of percent) the effect the S&P would incur with a 30% change in a component that has a 1.5% weighting. There may be better formula
Unless I’m wrong in my understanding, think about it as if that stock with the 1.5% weighting went to zero in one day, it would affect the S&P by -1.5%.. therefore a 30% down move in the stock would result in S&P moving down about a third of that or 0.45% if all other components stayed still
If it happens slowly over time, the quarterly rebalancing of market cap weighting structure of s&p 500 would affect the results too in this model
Jeff
