Some stock indices are weighted by the market capitalization of the stocks that are part of the index. Some stock indices are equal-weighted. Assume you notice that a market-weighted stock index dropped in value by 20% over the last month while the equal-weighted index that is focused on the same underlying set of stocks dropped by 30% over the same month. Which of the statements below would explain this difference? (Hint: the second link in the list of helpful resources provided in the instructions talks about market- and equally-weighted indices). If the equal-weighted index dropped more than the market-weighted index then the smaller firms in the index must have dropped more than the larger firms in the index. The difference in returns to the indices must be due to outliers. If the equal-weighted index dropped more than the market-weighted index then the smaller firms in the index must have dropped less than the larger firms in the index. 3 points D

Some stock indices are weighted by the market capitalization of the stocks that are part of the index. Some stock indices are equal-weighted. Assume you notice that a market-weighted stock index dropped in value by 20% over the last month while the equal-weighted index that is focused on the same underlying set of stocks dropped by 30\% over the same month. Which of the statements below would explain this difference? (Hint: the second link in the fist of helpful resources provided in the instructions talks about market-and equally-weighted indices). If the equal-weighted index dropped more than the market-weighted index then the smaller firms in the index must have dropped more than the larger firms in the index. The difference in returns to the indices must be due to outliers. If the equal-weighted index dropped more than the market-weighted index then the smaller firms in the index must have dropped less than the farger firms in the index