Which one of the following statements related to stock indexes is correct?
A)The index divisor increases in value whenever a stock in the index undergoes a stock split.
B)A value-weighted index includes both dividends and capital gains.
C)The S&P 500 index is value-weighted.
D)The DJIA is value-weighted.
E)Index staleness is more apt to be a problem for the DJIA than for the Wilshire 5000.

Question

Quizplus · Accepted Answer

The S&P 500 index is value-weighted, whereas the DJIA is price-weighted. The index divisor remains constant in value for a price-weighted index, whereas it changes for a value-weighted index whenever a stock undergoes a stock split. A value-weighted index includes capital gains but not dividends. Finally, index staleness is more likely to be a problem for the Wilshire 5000, which covers a much larger number of stocks than the DJIA.

Which One of the Following Statements Related to Stock Indexes