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Market capitalization/capitalisation (aka market cap, mkt cap or capitalized/capitalised value) is a measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company. As owning stock represents owning the company, including all its assets, capitalization could represent the public opinion of a company's net worth and is a determining factor in stock valuation. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in July 2008 ^[1].

Main article: Business valuation

Stock market capitalization in 2005

Market capitalization represents the public consensus on the value of a company's equity. A corporation, including all of its assets, may be freely bought and sold through purchases and sales of stock, which will determine the price of the company's shares. Its market capitalization is this share price multiplied by the number of shares in issue, providing a total value for the company's shares and thus for the company as a whole.

Many companies have a dominant shareholder, which may be a government entity, a family, or another corporation. Many stock market indices such as the (S&P 500, Sensex, FTSE, DAX, Nikkei, Ibovespa, and MSCI) adjust for these by calculating on a "free float" basis, ie the market capitalization they use is the value of the publicly tradable part of the company.

Note that market capitalization is a market estimate of a company's value, based on perceived future prospects, economic and monetary conditions, and therefore largely independent of a company's history. Stock prices can also be moved by speculation about changes in expectations about profits or about mergers and acquisitions.

It is possible for stock markets to get caught up in an economic bubble, like the steep rise in valuation of technology stocks in the late 1990s followed by the dot-com crash in 2000. Speculation can affect any asset class, such as gold or real estate. In such events, it is normal for companies to become valued past momentum extrapolated into the future justified by a convincing story as well as success, until the world mean-reverts causing significant losses. Conversely, stock markets will usually be primary transmission mechanism for most of the surprises that occur in the world's economy.^{[citation needed]}

Traditionally, companies are divided into large-cap, mid-cap, and small-cap. People have rules of thumb to determine category from market capitalization. These need to be adjusted over time due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950 but is now not very large), and they may be different for different countries. A common rule of thumb may look like:

• large-cap: over $1 billion
• mid-cap: from $100 million to $1 billion
• small-cap: from $10 million to $100 million
• microcap: stock under $10 million

Different numbers are found; obviously, no one agrees on the exact cutoffs.

• Financial ratio
• Fundamental analysis
• Growth stock
• Market price
• Market trends
• Technical analysis
• List of finance topics
• List of corporations by market capitalization
• Concentrated stock
• Free float
• Public float
• Restricted stock
• Shares authorized
• Treasury stock

This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (January 2008)

• How to Value Assets - from the Washington State (U.S.) government web site