Stock market indexes are constructed by weighting the components by any one of the following: A....

Stock market indexes are constructed by weighting the components by any one of the following:

A. weighting by market capitalization of the stock's company; weighting by the price of the stock; equal weighting for each stock
B. weighting by market capitalization of the stock's company; weighting by total sales of the company; equal weighting for each stock
C. weighting by market capitalization of the stock's company; weighting by total sales of the company; weighting by the price of the stock
D. weighting by total sales of the company; weighting by the price of the stock; equal weighting for each stock

Solutions

Expert Solution

Answer

Introduction of Stock market indexes

A market index is a hypothetical portfolio of investment holdings which represents a segment of the financial market. The calculation of the index value comes from the prices of the underlying holdings. Some indices have values based on market-cap weighting, revenue-weighting, float-weighting, and fundamental-weighting. Weighting is a method of adjusting the individual impact of items in an index.

Key Points

Market indexes provide a broad representative portfolio of investment holdings.
Methodologies for constructing individual indexes vary but nearly all calculations are based on weighted average mathematics.
Indexes are used as benchmarks to gauge the movement and performance of market segments.
Investors use indexes as a basis for portfolio or passive index investing.

Conclusion

weighting by market capitalization of the stock's company; weighting by total sales of the company; weighting by the price of the stock are thr components of stock market Indexes.

Answer(C)

jeff jeffy answered 1 year ago

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