Weighted Average

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Weighted Average

An average in which some values count for more than others. For example, if an index consisting of 10 stocks is weighted for price, this means that the average price of the stocks will move more when the stocks with higher price move. Most indices use weighted averages so that "smaller" values do not affect the index inordinately. This helps correct for the fact that averages tend to be affected by extreme values. One of the most common ways of weighting an average is to weight for market capitalization.
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The solid lines are the weighted mean while the dashed lines are the standard mean.
8) In contrast to the standard mean, the weighted mean remained fairly flat until the crisis, suggesting that larger BHCs in our sample tended to have a constant, or even decreasing, proportion of loans to assets before the financial crisis.
Since securitization was more common among larger banks, the jump is more noticeable in the weighted mean (the solid blue line) than in the standard mean (the dashed blue line).
Also worth noting is that the behavior of allowances does not appear systematically different across companies of different size: The standard mean (dashed line) and the weighted mean (solid line) are very close and move together during the entire sample period.
Thus, the observed gradual decline in the mean and weighted mean from 2005:Q1-2008:Q1 can be attributed entirely to the increase in total bank assets observed in Figure 2, rather than a decrease in the total value of securities held by these institutions.
These are large organizations whose behavior can drive the weighted mean.
It is interesting to note that both the standard mean and the weighted mean of cash holdings as a proportion of assets are approximately at the same level and evolved similarly during our sample period.
As before, the solid line corresponds to the weighted mean and the dashed line to the standard mean.
As for some of the previous figures, we compute a mean and a weighted mean across companies at each point in time.
We also see in the figure that both the standard mean and the weighted mean of the tier 1 capital ratio were trending down before the crisis and rapidly increase with the onset of the crisis, remaining at relatively high levels since 2009.
Solid lines represent the weighted mean and dashed lines represent the standard mean.

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