Free float market capitalization is a method of calculating the market capitalization of a stock market indexs underlying companies. It is calculated by multiplying the price of a stock by the number of shares readily available in the market. The free-float methodology is sometimes referred to as float-adjusted capitalization. This method is considered to be a better way of calculating market capitalization than the full-market capitalization method because it provides a more accurate reflection of market movements and stocks actively available for trading in the market.

The free-float market capitalization has several advantages:

• Companies with huge market capitalizations or low free-floating shares can now be considered in the index’s composition, and the index’s scope under free float expands significantly.
• Since only the company’s free-floating capital is considered, it is conceivable to include these kinds of businesses in the index under the free-float market capitalization to broaden the playing field.
• Free-float market capitalization allows broad-based indexing, which reduces the focus of investors and traders from companies with high market caps but low free floats.

The free-float market capitalization is calculated by excluding locked-in shares, such as those held by company executives and governments. Only shares or stocks that are currently available in the market for trading are taken into account by the free-float system. The free-float market capitalization is usually thought to provide a more accurate reflection of market movements and stocks actively available for trading in the market.

To calculate the free-float market capitalization, the following formula is used: Free-Float Market Capitalization = (Total Number of Outstanding Shares – Number of Shares Not Available for Trading by Public) * Share Price

In summary, free float market capitalization is a method of calculating the market capitalization of a stock market indexs underlying companies by taking into account only the shares that are available for trade. It is a more accurate reflection of market movements and stocks actively available for trading in the market.