For example, the NYSE Amex Composite Index (XAX) is composed of all of the securities traded on the exchange including stocks and American depositary receipts (ADRs).
The weighting of each component shifts with changes to each securities' price and the number of shares outstanding.
With this method a float factor is assigned to each stock to account for the proportion of outstanding shares that are held by the general public, as opposed to "closely held" shares owned by the government, royalty, or company insiders (see float).
[3] Historically, in the United States, capitalization-weighted indices tended to use full weighting, i.e., all outstanding shares were included, while float-weighted indexing has been the norm in other countries, perhaps because of large cross-holdings or government ownership.
Thus, price movement of even a single security will heavily influence the value of the index even though the dollar shift is less significant in a relatively high-value name.