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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 180.88+2.1%3:59 PM EDT
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To: Jim Mullens who wrote (171098)1/25/2022 2:05:56 AM
From: VinnieBagOfDonuts2 Recommendations

Recommended By
Jim Mullens
matherandlowell

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Jim,

Regarding Why would QCOM be weighted that heavily?

The PHLX SEMICONDUCTOR SECTOR INDEX or SOX Index is a modified market capitalization-weighted index, which is just a fancy way of saying it takes market cap into account but adds other diversification rules (like 8% max weighting) to make it more sector representative than unadjusted market cap.

The QQQ (NAS 100) is also a modified market capitalization-weighted index whereas the S&P500 is pure market cap weighted which works well for an index with 500 names that covers all sectors.

Anyway, here's a snip from SOX Index which lays out some of the rules:

CONSTITUENT SELECTION

The Index selects the 30 largest eligible securities by market capitalization.

CONSTITUENT WEIGHTING
Constituent weighting scheme

The Index is a modified market capitalization-weighted index.

Constituent weighting process SOX employs a two-stage weight adjustment scheme.
Index Securities’ initial weights are determined by dividing each Index Security's market capitalization by the aggregate market capitalization of all Index Securities.

Stage 1:

Initial index weights are adjusted to meet the following Stage 1 constraint, producing the Stage 1 weights:
• No Index Security weight may exceed 8%.

Stage 2:

Stage 1 weights are adjusted to meet the following Stage 2 constraints, producing the final weights:
• For Index Securities with the five largest market capitalizations, Stage 1 weights are maintained.
• For all other Index Securities, no weight may exceed 4%.

The final weights meet the following constraints:
• No Index Security weight may exceed 8% of the index; five may exceed 4%.

For additional information about index weighting, see Nasdaq Index Weight Calculations Guide. INDEX MAINTENANCE
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