DEFINITION
A mathematical process by which figures and/or components are adjusted to reflect importance by value or proportion. A weighted average, for example, takes into account the proportional relevance of each component, instead of measuring each individual component equally. For example, the Dow Jones Industrial Average (DJIA) is a priceweighted average that compares each security based on the stock's price relative to the sum of all the stocks' prices. The Nasdaq, on the other hand, is a market capitalization weighted index, where each company is measured relative to its market value.Where the DJIA and Nasdaq indexes utilize weighting in their calculation to more closely approximate the effect that changing stock prices will have on the overall market, weighting can also be used to help evaluate the past and current prices of individual instruments through technical analysis.
INVESTOPEDIA EXPLAINS
Emphasis can be placed on the more pertinent data through weighting; this method is used frequently in the investing and accounting world. A weighted moving average, for example, places additional emphasis on the most recent data, thereby providing a better view of current market activity. Similarly, a weighted alpha measures how much a stock has risen or fallen over a certain period, placing more emphasis on recent activity. Since more focus is placed on the current period, the calculation provides a more relevant measure for shortterm analysis. Other weighted metrics include weighted average cost of capital, weighted average coupon, and time weighted average annual rate of return.RELATED TERMS

Nasdaq
A global electronic marketplace for buying and selling securities, as well as ... 
Weighted Average Market Capitalization
A stock market index weighted by the market capitalization of each stock in ... 
Weighted Alpha
A weighted measure of how much a stock has risen or fallen over a certain period, ... 
Market Capitalization
The total dollar market value of all of a company's outstanding shares. Market ... 
Mean
The simple mathematical average of a set of two or more numbers. The mean for ... 
Dow Jones Industrial Average  ...
The Dow Jones Industrial Average is a priceweighted average of 30 significant ... 
Weighted Average
An average in which each quantity to be averaged is assigned a weight. These ... 
PriceWeighted Index
A stock index in which each stock influences the index in proportion to its ... 
Unweighted Index
A simple arithmetic or geometric average used to calculate stock indexes. Equal ... 
American Stock Exchange  AMEX
The thirdlargest stock exchange by trading volume in the United States. In ...
Related Articles

Mutual Funds & ETFs
Introduction To Fundamentally Weighted ...

Bonds & Fixed Income
How Now, Dow? What Moves The DJIA?

Active Trading Fundamentals
Weighted Moving Averages: The Basics

Mutual Funds & ETFs
Index Investing

Investing Basics
Top Companies Trading On The Toronto ...

Investing Basics
During what time does afterhours trading ...

Investing Basics
Why does afterhours trading (AHT) exist?

Trading Strategies
3 Key Signs Of A Market Top

Stock Analysis
How Nasdaq Continues To Innovate

Trading Systems & Software
FourWeek Rule Boosts Winning Trades