Reply To: Weight Effect

Optuma Forums Optuma General Discussion Weight Effect Reply To: Weight Effect

AvatarJeffrey A.
  • Topics: 26
  • Replies: 34
  • Posts: 60

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


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