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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
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References in periodicals archive ?
The Dow Jones industrial average, a price-weighted index, tracks the share prices of 30 large U.S.
In the past five years, they have strategically thought their way to a total return to shareholders of 53%, while the Value Line arithmetic index (a far better measure of performance than capitalization- or price-weighted indices) had a total return of 104%.

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