Weighted stock index

Weighted Stock Index

An index that tracks a number of stocks in which price changes in some stocks affect the index's price changes more than others. For example, suppose an index tracks three stocks: A, B, and C. If A is weighted more highly 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). It is common for weighted stock indices to be weighted for market capitalization, meaning the stocks with more capitalization affect the index more. The S&P 500 is a well-known weighted stock index. See also: Unweighted stock index.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Weighted stock index.

In weighted stock indexes, price changes in some stocks have a much greater impact than price changes in others in computing the direction of the overall index.

For example, in a market capitalization weighted index, such as the benchmark Standard & Poor's 500 Index (S&P 500), price changes in securities with the highest market valuations have a greater impact on the Index than price changes in stocks with a lower valuation.

Market capitalization of S&P indexes is calculated by multiplying the current price per share times the number of floating shares. Other market cap weighted indexes multiply the price by the number of outstanding shares. Market cap indexes may also be called market value indexes.

In contrast, in an unweighted index, such as the Dow Jones Industrial Average (DJIA), a similar price change in any of the stocks in the index has an equal impact on the changing value of the index.

The theory behind weighting is that price changes in the most widely held securities have a greater impact on the overall economy than price changes in less widely held stocks.

However, some critics argue that strong market performance by the biggest stocks can drive an index up, masking stagnant or even declining prices in large segments of the market, and providing a skewed view of the economy.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Initiatives to boost futures trading for 2019 are underway, according to the company, which includes the development of NTD-denominated futures based on Nasdaq-100, and implementation of dynamic price stabilization measures for the Taiwan Capitalization Weighted Stock Index (TAIEX) options and for other futures products based on a particular foreign stock market index.
They found that a 1000-point fall in the Taiwan Stock Exchange Capitalisation Weighted Stock Index (TAIEX) coincided with a 4.71percent daily increase in hospitalisations for mental disorders.
This weighted stock index fund measures the performance of the micro-cap segment of the US equity market.
Taiwan and South Korean shares, for instance, took a heavy beating Wednesday, with the Taiwan Capitalization Weighted Stock Index closing 2.2 percent lower, and South Korea's Kospi index finishing 3.51 percent down.
A stock market analyst indicated that the upward trend of M1B reflects growing idle funds in the monetary market, with such funds may be put in the stock market to boost the weighted stock index.
Some predict that the Taiwan's stock market might rebound sizably either in the fourth quarter of this year or the first quarter of 2010, with the weighted stock index soaring to more than 10,000.
An Asian brokerage expects the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) to challenge 11,650 points by the end of 2018 on the back of an improvement in the profitability of companies listed on the main board.
The annual growth of M1B exceeded that of M2 to form a "golden cross," reflecting a bullish stock market here that registered an average growth of 37.55% in weighted stock index.
The Taiwan Capitalization Weighted Stock Index rose about 3 percent while Hong Kong's Hang Seng Index was up more than 1 percent by midday.

Full browser ?