The Standard & Poor's 500 Index differs from the Dow Jones Industrial Index because:

Question

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The S&P 500 Index takes into account the prices of 500 of the largest firms, which is more than the DJIA, and uses a different weighting scheme (market capitalization) that takes into account not only stock prices, but also the number of shares outstanding. Therefore, D is the best choice. A is incorrect as the S&P 500 covers more than the DJIA. B is incorrect as the S&P 500 uses a market capitalization-weighted scheme, not a price-weighted index. C is incorrect as larger firms are generally more important in the S&P 500 due to the market capitalization weighting scheme.

The Standard & Poor's 500 Index Differs from the Dow