Market capitalisation is an important indicator for the valuation of companies and provides information about their size and importance on the market.
It is calculated by multiplying the current share price by the total number of outstanding shares. Since the share price is subject to constant fluctuations, the market capitalisation is also subject to constant change.
Market capitalisation is often used as the basis for including companies in indices. In the USA, for example, only companies with a minimum market capitalisation are included in the S&P 500 Index.
A high market capitalisation can also be seen as an indicator of high demand for a company's shares. Companies with a high market capitalisation are often referred to as "blue chips" and are considered particularly stable and reliable.
However, market capitalisation can also be overvalued, especially when companies are overvalued due to speculation or a positive market situation. A high market capitalisation is thus no guarantee of good performance and can quickly fall again due to sudden market fluctuations.
