Market System Capitalization, also known as the market capitalization rate, is defined as an aggregate value of a company’s stock. It can be calculated by multiplying the number of outstanding shares of stock by the stock’s current price per share. A company’s stocks are categorized into three groups: Large cap stocks, worth $5 billion or more, mid-cap stocks, worth between $1 billion and $5 billion, and small cap stocks, worth $1 billion or less.
Market system capitalization has a major impact on the nation’s economy. For instance, if the market capitalization rate or stock price of many companies within an industry is worth more than its income or assets it creates a bull market on the New York Stock Exchange. When the stock market enters a bull market it often induces heavy trading and an increase in stock sales on the New York Stock Exchange that may cause a recession.
According to About. Com the increase in the capitalization rate of many Internet companies created a bull market when its stocks were worth more than its income or assets. The resulting bull market induced heavy trading and stock sales which caused the 2001 recession.
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