Average Market Capitalization

Morningstar defines the overall "size" of a stock fund's portfolio as the geometric mean of the market capitalization for all of the stocks it owns. It's calculated by raising the market capitalization of each stock to a power equal to that stock's stake in the portfolio. The resulting numbers are multiplied together to produce the geometric mean of the market caps of the stocks in the portfolio, which is reported as average market capitalization. For example, if a fund currently held equal stakes in three stocks, with market capitalizations of $2 billion, $10 billion, and $25 billion, the geometric mean would equal:

($2 billion^1/3) x ($10 billion^1/3) x ($25 billion^1/3)  = $7.94 billion

This number is different from the fund's median market cap--the capitalization of the median stock in its portfolio. The geometric mean better identifies the portfolio's "center of gravity." That is, it provides more accurate insight into how market trends (as defined by capitalization) might affect the portfolio.

This is an in-house calculation, based on the fund’s most recently updated portfolio and month-end stock statistics as they have been determined by our internal equities database.