Investopedia

Continue to Site »

Weighted

Filed Under » , ,
Dictionary Says

Definition of 'Weighted'

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 price-weighted 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 Says

Investopedia explains 'Weighted'

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 short-term analysis. Other weighted metrics include weighted average cost of capital, weighted average coupon, and time weighted average annual rate of return.

Articles Of Interest

  1.

    Weighted Moving Averages: The Basics

    We take a closer look at the linearly weighted moving average and the exponentially smoothed moving average.

  2. Fundamentally Weighted Index Investing

    If you believe the market smiles on those who focus on value, growth or income, this vehicle may be for you.

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

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

  4. Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.

  5. Which Mutual Fund Market Cap Suits You?

    Different funds invest in companies with different market caps. Find out which is right for you.

  6. How To Make A Winning Long-Term Stock Pick

    Discover the key elements of a good long-term investment and how to find them.

  7. Investors: Rely On Your Gut

    Find out how your personality and natural instincts can direct your investment choices.

  8. What is a stock ticker?

    A stock ticker is a report of the price for certain securities, updated continuously throughout the trading session by the various stock exchanges. A "tick" is any change in price, whether that ...

  9. Barking Up The Dogs Of The Dow Tree

    One well-known and successful strategy for cashing in on dividends is the Dogs of the Dow. Here's what you need to know about them.

  10. Major Indexes Near Pre-Recession Levels: Is History Repeating Itself?

    The markets look to be moving back to where they were before the recession. Does this mean another is on the way?
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center