Free-float methodology

Free-float methodology is a method of calculating the market capitalization of an index's underlying companies. Instead of using all shares outstanding, as would be the case of a full-market capitalization method, the free-float method excludes shares that are closely held, and not traded, by businesses and governments. A free-float index captures the share of the market accessible by the trading public, and more accurately measures the investment set and investment performance of investors.

The method is calculated according to the following formula:

FFM= Share price x (#of shares outstanding - locked-in shares)

Almost all indexes now tracked by index mutual funds and exchange traded funds (ETFs) are free-float weighted indexes.