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GlossaryReference

Market Capitalization

The total dollar value of a company's shares — its price multiplied by shares outstanding.

What Market Capitalization means

Market capitalization (market cap) is calculated by multiplying a company's share price by the total number of shares it has issued. It gives a rough measure of a company's size: large-cap, mid-cap and small-cap refer to different size brackets. Market cap is useful for understanding what share of the market a stock represents, and it is recomputed constantly as the share price moves.

Example

A company with 1 billion shares trading at $50 has a market cap of $50 billion. Market cap changes as the share price changes, even if the company's business performance hasn't altered.

Related terms

ETFIndex FundDiversificationLiquidity

Disclaimer

Definitions are simplified for educational use and are not personalized financial, investment, tax or legal advice.

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Frequently asked questions

Because size tends to come with different behaviour. Larger companies are often more established and may pay dividends but typically grow more slowly; smaller companies can grow faster but tend to be more volatile. Holding a mix across size ranges is a common way to diversify, and broad index funds often do it for you automatically.

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