Price-Weighted Index Definition | CFI JO
Trading involves a high risk to the invested capital. Understand all risks before investing 

price-weighted index

A price-weighted index is a stock index where the companies in the index form a fraction of the total index relative to that company's stock price per share.

 

To calculate a price-weighted index in its simplest form you take the price of the total members' stock prices and divide them by the total number of companies in that index.a stock with a higher price will have more influence than a stock with a lower price and, therefore, will have a bigger impact on the index's overall performance.

 

The dow jones industrial average (djia) is one of the most well-known and most followed indexes in the world. when it was first created the djia consisted of only 12 stocks and was priced at 40.94. today it has increased to 30 stocks, making it one of the least diversified indexes around. although the calculating the dow’s value is not exactly straightforward, the calculation essentially comes from adding up the prices of all 30 companies within the index and dividing that number by the divisor (the "magic number").

 

Example of price weighted indexfor example, if you want to calculate a price-weighted average of four stocks with prices$200, $100, $85, $30 as follows:$200, $100, $85, $30price weighted average =___________________ = $415 4

 

Let us say that one of these stocks releases some positive news, and its shares jump by 10%. this would also raise the price-weighted average.

 

key takeaways

  • A price-weighted average is a simple mathematical average of several stock prices.
  • The most well-known price-weighted index in the u.s. is the dow jones industrial average.
  • The price movements of companies with the highest share price have the biggest impact on the value of the index.
CFI Financial Group is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
CFI Financial Group is globally regulated with subsidiaries in
London • Larnaca • Beirut • Amman • Dubai • Port Louis
Credit Financial Invest for
Financial Brokerage Ltd
Al Rabieh Towers, Al Rabieh
17545

Important Disclaimer:


We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other material he received directly from CFI or from its employees or through any provided analytical tools or third party research provided to the client from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client agrees that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.


Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financial Invest for Financial Brokerage Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

CFI Jordan is regulated by the Jordan Securities Commission

niss
forme
The Best Online Financial Trading Services, Middle East, 2020
Entrepreneur Magazine

Please publish modules in offcanvas position.