Which index is created by first deriving the initial total market value of all stocks used in the index?
A) equally-weighted index.
B) price-weighted index.
C) unweighted index.
D) value-weighted index.
E) over-weighted index.

Question

Quizplus · Accepted Answer

A value-weighted index derives the initial total market value of all stocks used in the index. This means that the weight of each stock in the index is based on its market capitalization (i.e. the total value of its outstanding shares). As a result, stocks with higher market capitalizations have a greater influence on the index. Diversified examples of value-weighted indices include the S&P 500 and the Wilshire 5000 total market index.

Which Index Is Created by First Deriving the Initial Total