- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 2. Security Market Indexes
- Subject 2. Index Construction and Management
CFA Practice Question
A price-weighted index gives the ______.
B. lowest-price stock more impact on the movement of the index
C. highest percentage change more impact on the movement of the index
A. highest-price stock more impact on the movement of the index
B. lowest-price stock more impact on the movement of the index
C. highest percentage change more impact on the movement of the index
Correct Answer: A
Price-Weighted Average: Each stock in the average is weighted by its price. The higher the price, the greater the relative weighing. The Dow Jones Industrial Average represents a price-weighted average.
User Contributed Comments 3
| User | Comment |
|---|---|
| kalps | DJIA is a price weighted index which looks negatively at stock splits |
| jasonkwk | what do u mean by looks negatively? |
| mcbreatz | A stock split will reduce the price of a stock by half so now that stock has less impact on the index. |