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Select all true statements If you want to create an index that reflects the behavior of 10 firms with similar market values but considerably different
Select all true statements If you want to create an index that reflects the behavior of 10 firms with similar market values but considerably different share prices, you should use the price weighted approach If you want to construct an index with 10 firms with different prices and market values, the methodology used (price or value weighting) would heavily affect the behavior of the index A value weighted index is computed by considering both the price of shares and the number of shares outstanding of each firm included in the sample The value of a price weighted index depends heavily on the market capitalization of the firms included in it
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