- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 2. Security Market Indexes
- Subject 1. Index Definition and Calculations of Value and Returns
CFA Practice Question
______ indices are NOT rebalanced.
B. Equally weighted
C. Market-capitalization weighted
A. Price-weighted
B. Equally weighted
C. Market-capitalization weighted
Correct Answer: A
This is because the weight of each constituent security is determined by its price.
User Contributed Comments 5
| User | Comment |
|---|---|
| johntan1979 | Then what's the purpose of the divisor, D? |
| geofin | to account for stocks splits, exclusions, inclusions, etc. |
| RicardoHM | +johntan1979: it is to establish it to a market index (e.g. 1000) |
| xemex131 | market-cap weighted indices are also not rebalanced because the weights are determined by price*free float shares |
| mcbreatz | I agree with market cap statement but reading gave reasons such as company mergers or removal of a stock that falls below a certain threshold. I don't really see how this is any different than a price-weighted to be honest. |