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Market-value weighted indexes, like the S&P 500, are calculated based on the total market capitalization of the companies within the index, meaning that larger companies have a greater influence on the index's performance. In contrast, price-weighted indexes, like the Dow Jones Industrial Average, are calculated based on the stock price of each component, giving more weight to higher-priced stocks regardless of their market capitalization. This can lead to significant differences in index performance, especially if a few high-priced stocks experience substantial price changes. Overall, the weighting method affects how each index responds to market movements and individual stock fluctuations.

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2mo ago

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