I would like to know how price-weighted index is formed in terms of number of shares used to calculate it. I found A is false but as a statement correct. Could you please explain on how to pirce-weighed index works. ----------------------------------\ Which of the following statements about bonds, indexes, markets, and market efficiency is FALSE? A) A price-weighted index assumes the investor holds an equal number of shares of the stocks in the index. B) A pure auction market is where buyers and sellers submit their bid and ask prices to a central location and transactions are matched by brokers who do not have a position in the security. C) Tests of market efficiency find that stock exchange specialists derive above-average returns. D) The bulk of all bond trading takes place on organized exchanges. Your answer: A was incorrect. The correct answer was D) The bulk of all bond trading takes place on organized exchanges. The bulk of all bond trading takes place in the over-the-counter bond markets.
I think option A sums it up. You have an equal number of shares in each company in the index.
we had a discussion about that on a thread yesterday Djia for example has price of stockA + price of stocB…(30stocks)/(30*correction coeficient) so basically the asumption is that you hold 1 stock of each
On a simmilar note, Is my reasoning correct on the following statements? 1) In a MV weighted index, you own the # of shares based on the weight of the MV in the total index. i.e if 1 company’s total mkt cap is 10B, in an index whose total mkt cap is 100B, you would hold 10% of your investable assets in that stock. 2) In a un-weighted index, you own, same $ amount for each stock, i.e $10 worth of stocks for all stocks in the index
yes i believe what you say it’s true