Price-Weighted Index

Price-Weighted Index

The weights in a price-weighted stock index such as the Dow Jones Industrial Average are calculated by taking the share price of one constituent and dividing it by the sum of the prices of all constituents. In other words, the shares with the highest share price have the biggest index weighting. The monetary (not percentage) performance of shares with the biggest weightings has a greater impact on index levels than those with small weightings.

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