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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 173.79-1.2%3:59 PM EST
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To: Jerome who wrote (8281)3/15/2000 8:32:00 PM
From: Clarksterh  Read Replies (1) of 10921
 
Jerome - However, would not more of the new money have to be added to the larger cap stocks than the smaller cap stocks because they are now a larger percentage of the index.

Yes, but ... it is the same percent of total capitalization, and thus should have the same effect on stock price movement. A company worth $2B will get 10x the new dollars as a company worth $200M, but the total percent influx is the same.

The primary cause of relative buying or selling due to index reballancing is that a company has issued new stock or has done a buy-back. In the event of issuing new stock, somewhat counter intuitively, the index funds must buy stock thereby raising the price. In a buy-back the index funds become overweighted, and must sell some stock, thereby lowering the price.

Hope this helps.

Clark
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