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Monday, March 9, 2015

A Different "Apple Effect"

Apple (AAPL) will be added to the Dow Index initially with a 4.3% weight. The index is price weighted so as the price goes up the weighting goes up so the higher the AAPL price again the higher the index.

But the initial impact is in the opposite direction the inclusion in the index creates large demand for AAPL. Many billions of dollars are indexed to the Dow Index. Any of those portfolios must by AAPL to match the index.

I dont know how large that number is. But just to give a part of that amount of stock that must be bought DIA the dow industrial index ETF alone has $12 billion in assets and apple will be a 4.3% weight so that alone is $516 million in apple stock that must be bought. By my calculation that is roughly ten times AAPLs averrage daily volume of 57.3 million shaes and .07% of the market capitalization of $737.4 billion

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