Asked by Trinity Roberts on Apr 28, 2024
Verified
In a ________ index, changes in the value of the stock with the greatest market value will move the index value the most, everything else equal.
A) value-weighted index
B) equally weighted index
C) price-weighted index
D) bond price index
Value-Weighted Index
An index in which the weight of each constituent is proportional to its market value, emphasizing larger companies.
Price-Weighted Index
A stock market index in which each company's influence on the index's performance is proportional to its stock price.
Bond Price Index
A measure that tracks changes in the prices of a basket of bonds over time, reflecting the overall performance of the bond market.
- Understand different types of stock indices and their calculations.
Verified Answer
MM
Molly McDaidMay 01, 2024
Final Answer :
A
Explanation :
In a value-weighted index (also known as a market capitalization-weighted index), the impact of a stock on the index is proportional to its market value (price times shares outstanding). Therefore, stocks with a higher market value have a greater impact on the index's movements.
Learning Objectives
- Understand different types of stock indices and their calculations.