Thursday, January 6, 2011

Stock Market Average

A stock market average is a price weighted or equally weighted index designed to characterize the movements of the overall market. The most well known stock market average is the Dow Jones Industrial Average. It is common practice these days for index methodology to include a market cap-weighting or a free-float adjusted market cap weighting in determining the movement of the index. The market capitalization approach gives a more realistic - experienced version of the market, while a stock market average, based on equal weights or price weights gives a broader representation of what's going on in the market.

Synonyms: Index, Stock index, Benchmark

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