> Take the s&p 500. The biggest constituent, Nvidia, accounts for 8% of its value. Imagine the $5.3trn chip-designer’s share price moves up or down by 3% (as has happened 30 times this year) and the other 499 stocks are flat.
That scenario (NVIDIA moves by 3% and no other stock moves) never happens. The market is dynamic, so all the stocks move at different magnitudes, volatility, frequency, etc. that is represented in the index.
> Take the s&p 500. The biggest constituent, Nvidia, accounts for 8% of its value. Imagine the $5.3trn chip-designer’s share price moves up or down by 3% (as has happened 30 times this year) and the other 499 stocks are flat.
That scenario (NVIDIA moves by 3% and no other stock moves) never happens. The market is dynamic, so all the stocks move at different magnitudes, volatility, frequency, etc. that is represented in the index.
But isn't that an economics thing, "all other things staying equal"?