Price-Weighted Index

A price-weighted index is a way to measure the overall performance of a group of stocks by averaging their stock prices, giving more influence to higher-priced stocks. Think of it like a weighted average where the value of the index depends on the individual share prices, not the company sizes or market value. For example, if a high-priced stock moves significantly, it will impact the index more than lower-priced stocks. This method helps investors see the general trend of the market or a sector, but it can be affected by changes in high-priced stocks more than others.