DEFINITION of 'Weighted Average'
An average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on the average. Weightings are the equivalent of having that many like items with the same value involved in the average.
INVESTOPEDIA EXPLAINS 'Weighted Average'
To demonstrate, let's take the value of letter tiles in the popular game Scrabble.
Value: 10 8 5 4 3 2 1 0
Occurrences: 2 2 1 10 8 7 68 2
To average these values, do a weighted average using the number of occurrences of each value as the weight. To calculate a weighted average:
1. Multiply each value by its weight. (Ans: 20, 16, 5, 40, 24, 14, 68, and 0)
2. Add up the products of value times weight to get the total value. (Ans: Sum=187)
3. Add the weight themselves to get the total weight. (Ans: Sum=100)
4. Divide the total value by the total weight. (Ans: 187/100 = 1.87 = average value of a Scrabble tile)
VIDEO

Euler's Constant
The limit of the sum of 1 + 1/2 + 1/3 + 1/4 ... + 1/n, minus ... 
Weighted Average Cost of Equity ...
A way to calculate the cost of a company's equity that gives ... 
Volume Weighted Average Price  ...
A trading benchmark used especially in pension plans. VWAP is ... 
Average Return
The simple mathematical average of a series of returns generated ... 
Weighted Average Cost Of Capital ...
A calculation of a firm's cost of capital in which each category ... 
Equal Weight
A type of weighting that gives the same weight, or importance, ...

How do I use Excel to calculate a weighted average?
A weighted average is simply a method of determining the mean of a set of data in which certain points occur multiple times ... Read Full Answer >> 
How do I use Excel to calculate the book value per common share?
Book value per common share is a method of stock valuation that allows investors to assess the relative safety of a stock ... Read Full Answer >> 
What is the difference between weighted average shares outstanding and basic weighted ...
Outstanding shares refers to stock that is currently held by investors, including shares held by the public, and restricted ... Read Full Answer >> 
What is the weighted average of outstanding shares? How is it calculated?
The amount of shares outstanding in a company will often change due to a company issuing new shares, repurchasing and retiring ... Read Full Answer >> 
What is the prime cost formula?
The term "prime cost" refers to the direct costs of manufacturing an item. It is calculated by adding the cost of raw materials ... Read Full Answer >> 
How does the market share of a few companies affect the HerfindahlHirschman Index ...
In economics and commercial law, the HerfindahlHirschman Index (HHI) is a widely used measure that indicates the amount ... Read Full Answer >>

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
Introduction To 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. 
Mutual Funds & ETFs
S&P 500 ETFs: Market Weight Vs. Equal Weight
Both indexes include the same stocks, but their weightings give them very different properties. 
Mutual Funds & ETFs
3 Types Of Indexing For ETF Success
ETF success relies on the index with which it's paired. Discover three index genres for tracking average market performance. 
Active Trading Fundamentals
Weighted Moving Averages: The Basics
We take a closer look at the linearly weighted moving average and the exponentially smoothed moving average. 
Bonds & Fixed Income
Investors Need A Good WACC
Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality. 
Fundamental Analysis
Exploring The Exponentially Weighted Moving Average
Learn how to calculate a metric that improves on simple variance. 
Fundamental Analysis
Calculating Future Value
Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. 
Economics
What is Deadweight Loss?
Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources. 
Economics
How to Do a CostBenefit Analysis
The benefits of a given situation or businessrelated action are summed and then the costs associated with taking that action are subtracted.