CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

______ indices are NOT rebalanced.

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.
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