capitalization method

Definitions (2)

1. Accounting: A method where the present value of an asset is determined by discounting its future cash flows.
2. Finance: A method of portfolio building where the manager purchases highly capitalized names in the stock index in proportion to its market capitalization. For instance, if the index has three stocks with the first stock having 60% capitalization of the index and the other two with 20% capitalization each, 60% of the portfolio would be composed of the first stock and the remaining 40% would be divided equally between the other stocks.
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capitalization capitalization of income