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 ?
The advantage of market cap and price weighted indexes is that they reweight themselves automatically as stock prices change.
Empirical research is not conclusive, if fundamental indexation does outperform market cap or price weighted indexes.
Over the past few years, researchers have questioned if market capitalization and price weighted indexes are as efficient as they are claimed to be.