Question

Which of the following is not a weighting scheme commonly used in creating equity market​ indexes?...

Which of the following is not a weighting scheme commonly used in creating equity market​ indexes?

A.

​industry-weighted.

B.

​value-weighted.

C.

​price-weighted.

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Answer #1

Answer

Correct Option : Option (a) Industry Weighted

Explanation

  • basically two most common weighting schemes used in the market to value Indexes are the ‘Price weighted’ and the ‘Value Weighted’
  • Under price weighted scheme, Stock prices are considered as base of the valuation and the stock prices influences the overall index
  • whereas under Value weighted index, overall market value (ie. market cap) is considered as base of the valuation
  • However, there is no such scheme called industry weighted
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