Price-weighted index

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Price-weighted index

An index giving a greater influence to higher-valued stocks by weighting all component stocks by their price.

Price-Weighted Index

An index that tracks a number of securities in which price changes in stocks that already have higher prices affect the index's price changes more than other securities. For example, suppose an index tracks three stocks: A, B, and C. If A has a higher price than B and C, an uptick in A will be more likely to result in an uptick in the index as a whole (depending on how much more weighted it is). Price weighted indices are less common than capitalization-weighted indices, but the Dow Jones Industrial Average is a prominent example.
References in periodicals archive ?
As most global technology indexes are either market capitalization or price weighted indexes, which use stock prices to reweight stocks within these indexes, for example NASDAQ.
Empirical research is not conclusive, if fundamental indexation does outperform market cap or price weighted indexes. But, if any outperformance does occur then researchers believe it could be attributed to the small cap and value tilt of the fundamental indexation methods (see Basu & Forbes, 2013; Blitz & Swinkels, 2008; Blitz, van der Grient, & van Vliet, 2010; Chen, Chen, & Bassett, 2007; Estrada, 2006; Hemminki & Puttonen, 2008; Hsu & Campollo, 2006; Hsu, Kalesnik, & Xie, 2011; Kaplan, 2008; Mar, Bird, Casavecchia, & Yeung, 2009; Seigel, 2006).
Over the past few years, researchers have questioned if market capitalization and price weighted indexes are as efficient as they are claimed to be.