Wilshire 5000

The price Wilshire 5000 from 2000 until Mar 30, 2007

The Wilshire 5000 Total Market Index, or more simply the Wilshire 5000, is a market-capitalization-weighted index of the market value of all stocks actively traded in the United States. Currently, the index contains over 6,307 components.^[1] The index is intended to measure the performance of most publicly traded companies headquartered in the United States, with readily available price data, (Bulletin Board/penny stocks and stocks of extremely small companies are excluded). Hence, the index includes a majority of the common stocks, REITs, and limited partnership shares, traded primarily through NASDAQ OMX or NYSE Euronext or the American Stock Exchange.

History

• The Wilshire 5000 Total Market Index was established by the Wilshire Associates in 1974, naming it for the approximate number of issues it included at the time. It was renamed the "Dow Jones Wilshire 5000" in April 2004, after Dow Jones & Company assumed responsibility for its calculation and maintenance.

• The base value for the index was 1404.60 points on base date December 31, 1970, when it had a total market capitalization of $1,404.596 billion. On that date, each one-index-point change in the index was equal to $1 billion. However, index divisor adjustments due to corporate actions and index composition changes have changed the relationship over time, so that by 2005 each index point reflected a change of about $1.2 billion in the index’s total market capitalization.^[2]

• The index did not close above its March 24, 2000 peak above 14,000 points (record high of the 20th century) until February 20, 2007, and a hypothetical investment in the Wilshire 5000, made at the 2000 peak and with subsequent dividends reinvested, did not become profitable on a closing basis until October 3, 2006.^[3]

• On April 20, 2007, the index closed above 15,000 for the first time. On that day, the S&P 500 was still several percentage points below its March 2000 high, because small cap issues absent from the S&P 500 and included in the Wilshire 5000 outperformed the large cap issues that dominate the S&P 500 during the cyclical bull market.

• The index reached its all-time high on October 9, 2007 at the 15,806.69 point level, right before the onset of the Late 2000s Recession and the related United States Housing Bubble.

• Since late 2007, the expansion of subprime lending difficulties into a wider Financial Crisis, plunged the United States into a renewed bear market that accelerated beginning on September 15, 2008. On October 8, the Wilshire 5000 closed below 10,000 for the first time since 2003.

• The index continued trading downward towards a 13-year low reaching the 6,858.43 level on March 9, 2009, representing a loss of about $10.8 trillion in market capitalization from its highs in 2007; but has since made a bear market rally towards the 11,500 level through the beginning of January 2010.

• The Wilshire 5000 gained approximately $2.5 trillion in market value during the first 11 months of 2009^[4] while the index rose 2,105 points. Therefore, as of November 2009, each index point continues to represent about $1.2 billion in market value.

Investing

Investing in the Wilshire 5000 is readily accessible through an exchange-traded funds offered through SSgA State Street Global Advisors the SPDRs, one of which attempts to match the daily performance of the index; SPDR Dow Jones Wilshire Total Market ETF (NYSE: TMW).

Versions

There are five versions of the index:

• Full capitalization total return
• Full capitalization price
• Float-adjusted total return
• Float-adjusted price
• Equal weight^[5][6]

The difference between the total return and price versions of the index is that the total return versions accounts for reinvestment of dividends. The difference between the full capitalization, float-adjusted, and equal weight versions is in how the index components are weighted.

Calculation

Let:

• M = Number of issues included in the index. Hence i ranges from 1 to M;
• P_i = Price of one share of issue i included in the index;
• N_i = Number of shares of issue i for the full capitalization version; or, the float of issue i for the float-adjusted version; or 1 for the equal weight version;
• α = a fixed scaling factor.

The value of the index is then:

At present, one index point corresponds to a little more than US$1 billion of market capitalization.

The list of issues included in the index is updated monthly to add new listings resulting from corporate spin-offs and initial public offerings, and to remove issues which move to the pink sheets or that have ceased trading for at least 10 consecutive days.

See also

• Wilshire Associates
• Russell 3000
• Dow Jones & Company
• News Corporation
• NASDAQ OMX
• NYSE Euronext

References

1. ^ "The Motley Fool - Wilshire 5000". http://www.fool.com/school/indices/wilshire5000.htm. 
2. ^ "Guide to the Dow Jones Wilshire 5000 Family of Indexes, September 2008". Dow Jones and Wilshire Associates Incorporated. http://www.djindexes.com/mdsidx/downloads/rulebooks/Dow_Jones_Wilshire_5000_Family_of_Indexes_Guide.pdf. Retrieved 2009-06-17. 
3. ^ Hulbert, Mark (2006-09-28). "Losses from 2000-02 bear market have now been erased". MarketWatch. http://www3.marketwatch.com/News/Story/8vQgvhGJ5LZB2tnlXZlzLSm?siteid=mktw&dist=TNMKTW. Retrieved 2009-03-23. 
4. ^ "Wilshire Indexes News Release, December 7, 2009". Wilshire Associates Incorporated. http://www.wilshire.com/Company/November_2009_Wilshire_Indexes_News_Release.pdf. Retrieved 2010-01-04. 
5. ^ "Wilshire: Index Calculator Result". http://www.wilshire.com/Indexes/calculator/. 
6. ^ "Dow Jones Wilshire > DJ Wilshire 5000/4500 Indexes > Methodology". http://www.djindexes.com/wilshire/us/5000-4500/index.cfm?go=methodology. 

External links

• Wilshire Associates
• Yahoo! Finance page for ^DWC