Price-Weighted Index

A price-weighted index is a stock index in which each company included in the index makes up a fraction of the total index proportional to that company’s share stock price per share. In its simplest form, adding the price of each stock in the index and dividing by the total number of companies determines the index’s value. A stock with a higher price will be given more weight than a stock with a lower price and, therefore, will have a greater influence on the index’s performance.