Explain how to compute a value-weighted index.


Explain how to compute a value-weighted index.


The index refers to a guide, a list and it is used for measuring changes. An example of an index is Nasdaq, made with a list of technology companies like Amazon, and Facebook in the United State.

Answer and Explanation: 1

A value-weighted index is calculated by assigning a weight to each company inside the index based on the value or market capitalization of the company. And the given weight will define how much a particular company influence on results of an index. A company with a large market capitalization is more valuable and they have more weight on the index. If they moves up or down the index also moves in the same way with high intention and for price movement in low market capitalization company the index less reacts.

Learn more about this topic:

What is a Database Index? - Definition & Tutorial


Chapter 6 / Lesson 10

Take a look into the definition of a database index, a comparison of spreadsheets and database indexes, a full-text search engine comparison, a tutorial of database index types, and some categories of database indexes.

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