Arithmetic Index

Filed Under » ,
Dictionary Says

Definition of 'Arithmetic Index'

An index of securities that uses an arithmetic sum to determine changes in the index without taking the relative size of the securities into account. An arithmetic index of stocks does not incorporate weightings based on market capitalization, price, or any other metric, but merely calculates the raw changes in each component, then divides the sum by the number of index components.

Also known as an "unweighted index".
Investopedia Says

Investopedia explains 'Arithmetic Index'

Most stock indexes are market-cap weighted, which means that the largest companies will exert a larger influence on the index that the smallest. The Standard & Poor's 500 Index and the Nasdaq-100 are both market-cap weighted, while the Dow Jones Industrial Average (DJIA) is price-weighted. The Value Line index is calculated arithmetically, although few other major indexes fail to account for the size of their components in some way.


Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Capitalization-Weighted Index

    A type of market ...

  2. Market Capitalization

    The total dollar ...

  3. Standard & Poor's 500 Index - S&P 500

    An index of 500 ...

  4. Arithmetic Mean

    A mathematical ...

  5. Geometric Mean

    The average of a ...

  6. Boom

    A period of time ...

  7. Dow Jones Industrial Average - DJIA

    The Dow Jones ...

  8. Blue-Chip Index

    A stock index ...

  9. Hong Kong Stock Exchange (HKG) .HK

    One of the ...

  10. Hollywood Stock Exchange - HSX

    An online ...

Articles Of Interest

  1. How do I find mutual funds that track indexes?

  2. Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.

  3. How Now, Dow? What Moves The DJIA?

    Find out how this index tracks market movements - and where it falls short.

  4. DCF Valuation: The Stock Market Sanity Check

    Calculate whether the market is paying too much for a particular stock.

  5. How Interest Rates Affect The Stock Market

    Whether you're buying lunch, a home or a stock, you're influenced by interest rates.

  6. Stock Market Simulators: Play Your Way To Profits

    Online stock simulators make learning about stocks as fun and easy as playing a game.

  7. Understanding Interest Rates, Inflation And The Bond Market

    Get to know the relationships that determine a bond's price and its payout.

  8. Why There Are Few Sell Ratings On Wall Street

    We outline reasons that may show why enforcing more sell ratings isn't guaranteed to increase Wall Street's objectivity.

  9. The Roles Of Traders And Investors In The Marketplace

    Discover how these two groups work together to keep the market functioning properly.

  10. Advocacy Group Seeks To Change Name Of S&P 500

    "Brokers Against Unpleasant Sociolinguistics" are campaigning to change the name of the S&P 500 Index.
Sponsored links

comments powered by Disqus
Hot Definitions

  1. Love Money

  2. Shark Watcher

  3. Judo Business Strategy

  4. Dogs Of The Dow

  5. Chinese Hedge

  6. X-Mark Signature

Recommended
Loading, please wait...
See More »
Trading Center