The weight cap factor is one of the parameters in the equation used in index rebalancing, which adjusts the weight of the most highly capitalized shares in an index to the weight cap set for the index.
For example, if indices did not have a weight cap imposed on them – the "original" weight of Teva Pharmaceuticals would be particularly high (as a result of the large free float value). In order to limit its weight, the original weight is adjusted by the weight cap factor.
The factor is calculated for each share in the index on a Quarterly basis (synchronized with Quarterly updates of Liquidity bracket, IANS and free float for rebalancing). When the "original" weight is higher than weight cap – the factor will be less than 1.
For weight cap factor in TASE indices, click here
