Price Weighted Index

A stock market index in which the weight given to each stock is proportional to its price. A stock trading at $50 has ten times more influence on the index than one trading at $5 even though the $5 stock may be for a much larger company. Index constituents are periodically adjusted so that each has an appropriate weight. This contrasts with a market-value weighted index in which the weighting of each share is proportional to each company's market capitalization. The Dow Jones Industrial Average (DJIA) and the Nikkei 225 are price weighted indices; the S&P500 and the Nasdaq Composite are market value indexes.