Index Divisor


DEFINITION of 'Index Divisor'

A number used in the denominator of the ratio between the total value of an index and the index divisor. The number, which typically has little mathematical rationale behind it, remains consistent and therefore enables comparability within the index over time.

How the value of the index is computed depends on the type of index under consideration.

BREAKING DOWN 'Index Divisor'

An index divisor is a crucial number in the calculation of the value of an index. It is the basis for comparability across time, and the starting point for adjustments that need to be made due to changes in the equity composition of the underlying companies in the index.

Some of the adjustments that may need to be made to the divisor include changes in the number of shares floated by a company, any rights offerings made to employees or management, and any share repurchases.

  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Index Hugger

    A managed mutual fund that tends to perform much like a benchmark ...
  3. Dow Jones Industrial Average - ...

    The Dow Jones Industrial Average is a price-weighted average ...
  4. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  5. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  6. Index

    A statistical measure of change in an economy or a securities ...
Related Articles
  1. Mutual Funds & ETFs

    Introduction To Fundamentally Weighted Index Investing

    If you believe the market smiles on those who focus on value, growth or income, this vehicle may be for you.
  2. Mutual Funds & ETFs

    Enhanced Index Funds: Can They Deliver Low-Risk Returns?

    These funds may look appealing. Find out whether they can really live up to all of their promises.
  3. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  4. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  5. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  6. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  7. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  8. Investing

    Asset Manager Ethics: Rules Governing Capital Markets

    The integrity of the capital markets needs to be kept at utmost importance for all investors. This article shows how to maintain the integrity while investing.
  9. Investing

    What is Descriptive Statistics?

    Descriptive statistics is the term applied to meaningful data analysis.
  10. Fundamental Analysis

    Create a Monte Carlo Simulation Using Excel

    How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel.
  1. What are the pros and cons of using the S&P 500 as a benchmark?

    The Standard & Poor's 500 Index is the most commonly used benchmark for determining the state of the overall economy. ... Read Full Answer >>
  2. What does the S&P 500 index measure and how is it calculated?

    The S&P 500 measures the value of stocks of the 500 largest corporations by market capitalization listed on the New York ... Read Full Answer >>
  3. How is the value of the S&P 500 calculated?

    The S&P 500 is a index that gives investors an idea of the overall movement in the U.S.equity market. The ... Read Full Answer >>
  4. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!