Global benchmark indices are becoming increasingly dominated by a handful of mega‑cap stocks. This concentration can cause the headline index volatility to diverge from the broader market because shocks to a few large constituents are amplified.
Use the sliders below to adjust the concentration level (percentage of market cap held by the top 10 stocks) and the base market volatility. The chart shows the resulting effective index volatility calculated with a simple amplification model:
Effective Volatility = Base Volatility × (1 + k × (Concentration‑30%)) where k≈0.8 reflects how extra concentration magnifies swings.
Interpretation
The blue line shows how the effective index volatility rises as concentration increases. When concentration is near historical averages (~30%), the amplification is modest. Above ~45% the volatility spikes sharply, illustrating the risk of a concentrated benchmark.