facebookWhy invest in tracking the DOW Jones index when it is price weighted instead of market cap weighted like the S&P 500? what's the difference? - Seedly
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Anonymous

07 Feb 2020

Why invest in tracking the DOW Jones index when it is price weighted instead of market cap weighted like the S&P 500? what's the difference?

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    What are your thoughts?

    Kelly Trinh

    Kelly Trinh

    02 Nov 2019

    Level 11ยทBackoffice technical at financial services firm

    In a market-weighted index, if a company representing 10% of the index goes up by 50% (say), then the index would roughly go up by 5% if other shares flat. For a price-weighted index, it depends on the dollar price of the different shares and cannot say for sure what would happen to the index.

    For this reason, market-weighted indices are a better representation of the overall performance of the market and much more common to find instruments to track.

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      10 year comparison:

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