DEFINITION of 'Unweighted Index'
A simple arithmetic or geometric average used to calculate stock indexes. Equal weight is invested in each of the stocks in an index with equal dollar amounts invested in each underlying stock. Because the stocks are equally weighted, one stock's performance will not have a dramatic effect on the performance of the index as a whole. This differs from weighted indexes, where some stocks are given more weight than others, usually based on their market capitalizations.
BREAKING DOWN 'Unweighted Index'
As an example of how to calculate an arithmetic average, suppose that there are three stocks in an index with returns of 10%, 11% and 15%. The arithmetic return would be calculated as follows:
(0.10+0.11+0.15)/3 = 0.1200 =12%
In other words, you add the returns of each of the stocks in the index and divide this figure by the total number of stocks in that index.
To calculated a geometric average, suppose again that there are three stocks in an index with returns of 10%, 11% and 15%. The geometric return would be calculated as follows:
[(1+0.1)*(1+0.11)*(1+0.15)]^(1/3) = 1.1198 = 11.98%
In this case, you multiply the returns and take the 'n'th (where 'n' equals the number of stocks in the index) root of the product. The geometric average will either be equal to or lower than the arithmetic average.

Index
A statistical measure of change in an economy or a securities ... 
Weighted
A mathematical process by which figures and/or components are ... 
Weighted Average Market Capitalization
A stock market index weighted by the market capitalization of ... 
Mean
The simple mathematical average of a set of two or more numbers. ... 
Arithmetic Mean
A mathematical representation of the typical value of a series ... 
Value Line Index
A stock index containing approximately 1,675 companies from the ...

Investing Basics
An Introduction To Stock Market Indexes
Investopedia explains the five most talked about indexes and what makes them all different. 
Mutual Funds & ETFs
4 Steps To Building A Profitable Portfolio
This is a stepbystep approach to determining, achieving and maintaining optimal asset allocation. 
Mutual Funds & ETFs
Which Mutual Fund Market Cap Suits You?
Different funds invest in companies with different market caps. Find out which is right for you. 
Mutual Funds & ETFs
Top 3 Muni California Mutual Funds
Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability. 
Investing Basics
3 Key Signs Of A Market Top
When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them. 
Investing
Asset Manager Ethics: Rules Governing Capital Markets
The integrity of the capital markets needs to be kept at utmost importance for all investors. This article shows how to maintain the integrity while investing. 
Investing
What is Descriptive Statistics?
Descriptive statistics is the term applied to meaningful data analysis. 
Fundamental Analysis
Create a Monte Carlo Simulation Using Excel
How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel. 
Mutual Funds & ETFs
Top 4 Inverse Equities ETFs
Explore analysis of some of the most popular inverse and leveragedinverse ETFs that track equity indexes, and learn about the suitability of these ETFs. 
Forex Fundamentals
How Foreign Exchange Affects Mergers and Acquisitions Deals
Learn how foreign exchange rates can impact the flows of international merger and acquisition (M&A) transactions, and understand how deals can impact exchange rates.

How is the value of the S&P 500 calculated?
The S&P 500 is a U.S.market index that gives investors an idea of the overall movement in the U.S.equity market. The ... Read Full Answer >> 
Is Colombia an emerging market economy?
Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
Why would a corporation issue convertible bonds?
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >> 
What are some of the more common types of regressions investors can use?
The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >> 
What types of assets lower portfolio variance?
Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >>