EagleTed
01-05-2003, 08:59 AM
Many if not most investors have heard of the S&P 500, just as they know of the DOW. The DOW or <A HREF=http://www.dowjones.com/>Dow-Jones Industrial Average</A> is the most quoted index on the news, but the S&P 500 is nearly as often cited. The DOW is only 30 stocks and although it has been around longer than the S&P it isn't a good indication of what the market as a whole is doing.
The S&P 500 isn't the whole market either, but it comes closer as an indication. Most mutual fund managers are measured against the S&P 500 in terms of results for the year, three year period, and five year period. It is the market when it comes to institutional investments. This is because institutions by size and regulation are prohibited from investing in the small caps (small market capitalization).
<A HREF=http://www2.standardandpoors.com/NASApp/cs/ContentServer?pagename=sp/Page/HomePg>Standard and Poors</A> established and maintains the list. Companies are added or deducted from the list occasionally and annually the list is reviewed. In order to make the list companies must:<UL>
<LI>Be US companies
<LI>Have liquidity in their stock prices
<LI>Market Cap of $3 Billion or more
<LI>Be financially viable
<LI>Have "public float" of 50% of it's stock or more
<LI>Be public operated company, not a holding company, etc.
[/list]
It's important to note that S&P is an independent rating service company that doesn't do investment banking. They are owned by <A HREF=http://www.mcgraw-hill.com>McGraw-Hill (NYSE symbol: MHP).</A>
The DOW is owned by <A HREF=http://investor.mcgraw-hill.com/ireye/ir_site.zhtml?ticker=MHP&script=11955&item_id='ir_ home.htm'>Dow-Jones (NYSE symbol: DJ)</A> which also owns the Wall Street Journal.
The S&P 500 isn't the whole market either, but it comes closer as an indication. Most mutual fund managers are measured against the S&P 500 in terms of results for the year, three year period, and five year period. It is the market when it comes to institutional investments. This is because institutions by size and regulation are prohibited from investing in the small caps (small market capitalization).
<A HREF=http://www2.standardandpoors.com/NASApp/cs/ContentServer?pagename=sp/Page/HomePg>Standard and Poors</A> established and maintains the list. Companies are added or deducted from the list occasionally and annually the list is reviewed. In order to make the list companies must:<UL>
<LI>Be US companies
<LI>Have liquidity in their stock prices
<LI>Market Cap of $3 Billion or more
<LI>Be financially viable
<LI>Have "public float" of 50% of it's stock or more
<LI>Be public operated company, not a holding company, etc.
[/list]
It's important to note that S&P is an independent rating service company that doesn't do investment banking. They are owned by <A HREF=http://www.mcgraw-hill.com>McGraw-Hill (NYSE symbol: MHP).</A>
The DOW is owned by <A HREF=http://investor.mcgraw-hill.com/ireye/ir_site.zhtml?ticker=MHP&script=11955&item_id='ir_ home.htm'>Dow-Jones (NYSE symbol: DJ)</A> which also owns the Wall Street Journal.