A price-weighted index is a type of stock market index where the components are weighted based on the price per share of each company included in the index. In a price-weighted index, companies with higher stock prices have a greater impact on the index’s value compared to those with lower stock prices, regardless of the respective market capitalizations. This means that a price movement of a higher-priced stock will have a larger influence on the index’s performance compared to a lower-priced stock. Examples of price-weighted indexes include the Dow Jones Industrial Average (DJIA).
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