Types of weighting

Find details on how indices are weighed. Indices are classified as equally-weighted, market-capitalization-weighted, and price-weighted.

• Equally-weighted index: Each stock is given equal weight in the index calculation. This means that the index reacts exactly the same way to percentage changes of equal magnitude in companies A and B.
• Market-capitalization-weighted index: Each stock is weighted by its market capitalization (price × number of shares). Most indices are market-capitalization-weighted.
• Price-weighted index: In a price-weighted index, the index level is calculated by summing the stock prices and dividing by the number of index constituents. Among other things, this means that stocks with high prices have a greater influence on the index level than those with low prices.