NISM Certifications · NISM-Series-VIII: Equity Derivatives · Understanding Index
In a free-float market capitalisation weighted index, which shares are excluded when computing the market capitalisation of a constituent company?
A free-float index excludes shares held by promoters and other strategic holders that are not available for trading. Only shares readily available to public investors are counted, because they better reflect the market value actually tradable. Retail holdings remain included in the free float.
- AShares held by promoters and other strategic holders that are not available for tradingCorrect
- BShares that were traded on the previous day
- CShares issued in the last financial year
- DShares held by retail investors
Explanation
Free-float market capitalisation counts only the shares readily available for trading in the market. Shares held by promoters, governments and other strategic holders are excluded. Retail-held shares are part of the free float, so they are not excluded.
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