Insiderman

The S&P 500: Five Things You Probably Don't Know

For cap weighting the index, you have to do it the way you describe:

"But the index’s P/E is not cap-weighted. To calculate the P/E, S&P sums the earnings-per-share for all 500 stocks over the past 12 months—unweighte... uses that raw number as the E in P/E. The numerator P is the index’s value, which as we have seen is cap-weighted. Thus the calculation of P/E is a hybrid: a cap-weighted P divided by an equal-weighted E for the 500 stocks in the index."

When I make an earnings forecast for each company in the S&P 500 and sum those results, I want to be able to multiply by some function of the P/E to know the value of the index.