Index Divisor

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Exchange-Traded Fund - ETF

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

    A statistical measure of change in an economy or a securities ...
  3. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
  4. Index Hugger

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

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

    An index of 500 stocks chosen for market size, liquidity and ...
Related Articles
  1. Introduction To Fundamentally Weighted ...
    Mutual Funds & ETFs

    Introduction To Fundamentally Weighted ...

  2. Enhanced Index Funds: Can They Deliver ...
    Mutual Funds & ETFs

    Enhanced Index Funds: Can They Deliver ...

  3. How is the value of the S&P 500 calculated?
    Investing

    How is the value of the S&P 500 calculated?

  4. How A Limited Government Affects A Country's ...
    Economics

    How A Limited Government Affects A Country's ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center