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How much money would it take to move the S&P 500 +1% or -1%? How would this be estimated?

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  • Read up on "index divisors". You can use the S&P 500's index divisor to calculate how much a particular stock has to move in order to move the S&P 500 by a particular amount. – Flux Jul 28 '20 at 12:01
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    Note that the S&P 500 is an index; it is not an ETF. ETFs tracking the S&P 500 have various tracking errors, so even if you get an answer for the S&P 500, it may not be accurate for the ETF you are looking at. – Flux Jul 28 '20 at 12:04
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For ease of discussion, I'm going to use the 500 Dow Jones Industrial Average (DJIA) which is a price-weighted index. Each stock has equal weighting and the daily change is determined by adding up the aggregate change of all 30 companies and then dividing by the index divisor which is currently a bit above 0.14 . That means that the index will move about 7 points for every dollar that a DJIA stock moves.

To move the DJIA 1%, the dollar amount that the stocks would have to move would be roughly:

  • (Index Value) * .01 / 7

It is important to note that this is the dollar amount that the index must change in order to achieve a 1% change in the index. It is not the amount of money needed to move the index because in order to move a stock's price, all volume at current price must be taken out before price will move. On low volume days, that dollar amount is less. On high volume days, that dollar amount is higher. Therefore, the dollar amount varies from day to day.

The S&P 500 is a market-capitalization-weighted index of the 500 largest US companies and therefore, the effect of each stock on the index is not the same. However, the premise is the same. You can calculate how much the aggregate change must be to move the index 1% but not the dollar amount needed to achieve this.

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Worth noting that this question is basically impossible to answer, as stock markets can easily collapse or increase with little/no money actually traded, or have the inverse effect, with huge sums traded for no change in price.

The offers available to buy/sell a house that has just started burning down will be radically different than it was before the fire started despite no actual sale being made between the before and after fire bids for fairly obvious reasons.

Conversely, a huge block trade of a company founder's family selling a big % of a company to de-risk can easily be made without moving the dial on any price as the market is fully aware of the sale reason and happy to buy this huge block at market price(s).

This effect basically scales up through all stock indexes and markets.

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