Constituent

DEFINITION of 'Constituent'

A single member of an index. A constituent is typically a stock or company that is part of a larger index such as the S&P500 or Dow Jones Industrial Average. The aggregate of all the constituents make up the index, and generally each constituent has to meet the requirements and be selected to be included in the index.

BREAKING DOWN 'Constituent'

For example, to become a constituent in the S&P500, a stock has to meet certain requirements with regard to market cap, market exposure, liquidity, etc. Indexes also periodically review their constituents to make sure they are meeting the minimum requirements, and if they don't, the index may remove the constituents from the index. This can negatively affect the constituents' reputation with investors.

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