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A Market Cap weighted index is calculated a lot like a school teacher weighs grades. Example: Quiz: 20%

Homework: 20%

Final Paper: 60% So if you got a 80% on your quiz, a 90% on your homework and a 70% on your final your grade would be: 80(.2)+90(.2)+70(.6)= 76% (as compared to 80% without weight) So for a weighted market cap index if you have 3 companies A, B, and C, and each is a different size, then the idea is the largest companies have the largest effect on the total "weighted" result. Conversely the smaller companies will have a smaler effect; in much the same way that your homework matters less than your final in our imaginary school.

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