Float

On the exam, float most often shows up in index-construction items: you’re handed a company’s total shares and a closely held block and asked for its float-adjusted index weight. The tell is “freely tradable” or “shares available to the public.” The answer is the company’s float-adjusted market cap divided by the index’s aggregate float-adjusted market cap — so a firm with a big insider stake is underweighted versus its full market-cap weight. Pick the choice built on available shares, not total shares outstanding.

The classic trap is conflating float with liquidity: float is a share count, while liquidity is the ease and cost of trading, gauged by the bid-ask spread and daily volume. A large float makes liquidity likely but never guarantees it. Don’t confuse low float with volatility either — low float amplifies price moves, but volatility itself is the standard deviation of returns, not a share count. And a ticker is just an identifier, unrelated to float. Memory hook: float is what floats freely to the public; treasury and locked-up insider shares don’t count.