A good example of market value- A market value-weighted index is the weighted in

Question

A good example of market value- A market value-weighted index is the weighted index is the weighted average of the returns of each component security, with weights proportional to outstanding market value; Standard & Poor's Composite 500 simple average of the returns of each stock in an index; Dow Jones Industrial Average simple average of the returns of each stock in an index; Standard & Poor's Composite 500 average computed by adding the prices of the stocks and dividing by a "divisor"; Standard & Poor's Composite 500 weighted average of the returns of each component security, with weights proportional to outstanding market value; Dow Jones Industrial Average

Explanation / Answer

Answer is Option 1

Market value weighted index is index of a group of securities calculated by using a weighted average of the returns on each security in the index, where the weights are proportional to outstanding market value.

Now, S&P500 composite index is a market value weighted index.

Dow Jones Industrial average index is weighted by price (hence option 5 is eliminated).

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