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In this video we'll talk about the world's best-known stock index, the S&P 500.
It is a financial index that lists the largest shares (by value) listed on the U.S. exchanges.
This index includes 500 leading companies and reflects approximately 80% of U.S. stock market cap coverage. It officially appeared on March 4, 1957, released by Standard & Poor's.
Its constitution and weighting methodology differentiates it from indices such as the Dow Jones Industrial Average or nasdaq. Many consider it the best representation of the U.S. stock market and a barometer of the U.S. economy.
What is a Stock Index?
A stock index is used to describe the performance of the stock market or a specific part of it and compare the returns on investments. In general, an index uses a weighted average of stock prices.

How does the S&P 500 work?
The S&P 500 uses a market cap weighting method, which allows a larger percentage to be attributed to companies with the largest market capitalization.
A company's capitalization is calculated by multiplying the current share price by the number of shares in circulation.
S&P uses only free float stocks, i.e. shares available for public trading. Thus, Stand and Poor's adjusts the market capitalization of each company to offset new emissions or corporate mergers.
The index value is calculated by adding the adjusted market capitalizations of each of the 500 companies and dividing the result by a divisor. This divider is proprietary information from Stand & Poor's and is not disclosed to the public.
However, we can calculate a company's weight in the index, which can provide investors with valuable information. If a stock goes up or down, we can get an idea of the impact this might have on the overall index.
For example, a company with a weighting of 10% will have a greater impact on the value of the index than a company with a weighting of 2%.

How are the companies that make up the S&P 500 chosen?
A committee selects each of the index's 500 corporations based on their liquidity, size and industry. It rebalances the index quarterly in March, June, September and December.
To qualify for the S&P 500, you must meet the following requirements:
1. Must have operation in the United States;
2. Have a minimum market value of $6.1 billion;
3. At least 50% of the shares must be available to the public;
4. Minimum price of $1 per share;
5. At least 50% of fixed assets and revenues must be in the United States.
6. Count on positive results in at least four quarters in a row;
7. The shares should be listed on the New York Stock Exchange, Investors Exchange, NASDAQ or BATS.

What is the difference between the other indexes?
The S&P 500 is considered the preferred index of institutional investors due to its depth and breadth. The Dow Jones index, for example, has always been associated with the U.S. stock market indicator for retail investors.
In addition, investors perceive the S&P 500 to be more representative of U.S. stock markets as it includes more stocks (500 vs. 30 from the Dow Jones).
Another difference is that the S&P 500 takes into account the weighting of market capitalization, while the Dow Jones considers the share price.
When compared to the NASDAQ Composite index, it is possible to see that the S&P 500 has a wider range.
The index calculated by Stand & Poor's takes into account all U.S. exchanges. The NASDAQ Composite is based on more than 4,000 shares traded on the Nasdaq Stock Market. However, the vast majority of companies that trade on this exchange are technology, which leads to segmentation.

I hope you enjoyed this brief and simplistic analysis. The numbers used are rounded values, and the opinions given are just my personal perspective, it is not a recommendation.
Leave suggestions in the comments of index that would like to be analyzed in next videos.
Thanks for watching and good business.