To help understand financial index changes, you should know how indexes are built. Indexes are not created equal (well . . . one is). Financial indexes are constructed in three different ways:
Price-weighted: Favors higher-priced stocks
Market cap-weighted: Favors higher-cap stocks
Equal dollar-weighted: Each stock has same impact
dummies
Source:http://www.dummies.com/how-to/content/how-financial-indexes-are-constructed.html
No comments:
Post a Comment