Market Capitalization

Market Capitalization (or market cap) is the total market value of a publicly traded company's outstanding shares of stock.

Calculated by multiplying a company's total shares outstanding by the current market price of one share, market capitalization classifies public companies into three primary segments:

• Large-Cap: Market value of $10 billion or more. These represent established, financially stable industry leaders (e.g., Apple, Microsoft) that dominate the S&P 500.
• Mid-Cap: Market value between $2 billion and $10 billion. These are expanding companies offering a balance of growth and stability.
• Small-Cap: Market value between $250 million and $2 billion. Typically younger, faster-growing enterprises that carry higher volatility and risk.

The mathematical formula is:

Market Cap = Shares Outstanding × Share Price

In portfolio modeling, index weighting schemes commonly use market cap (meaning larger companies comprise a larger portion of the index). In contrast, specialized passive portfolios like the **Golden Butterfly** and the **Larry Portfolio** intentionally tilt their asset allocation toward Small-Cap Value stocks, seeking to capture the historical size and value risk premiums documented by Eugene Fama and Kenneth French.