Which of the following demonstrates that simple price indices are limited because they do not fully reflect changes in shareholder wealth?
A)They only trace changes in the aggregate market capitalisation of securities.
B)They ignore dividends paid to shareholders.
C)Not all companies are represented in the index.
D)They are not updated often enough to be meaningful.

Question

Quizplus · Accepted Answer

Simple price indices only measure changes in the prices of a company's securities, they do not factor in dividends paid to shareholders. This means that they do not fully reflect changes in shareholder wealth as dividends are a key source of income for shareholders.

Which of the Following Demonstrates That Simple Price Indices Are