
Answer-first summary for fast verification
Answer: equal-weighting method.
**Explanation:** - **Option A (Incorrect):** The price-weighting method determines the index value by dividing the sum of security prices by a divisor. Securities with higher prices have greater weight, but this method does not inherently underrepresent securities with the largest market value. Stock splits can cause arbitrary changes in weights, but this is not systematic. - **Option B (Correct):** The equal-weighting method assigns the same weight to all securities, regardless of their market value. This leads to underrepresentation of securities with the largest market value and overrepresentation of smaller securities. - **Option C (Incorrect):** The market-capitalization-weighting method holds securities in proportion to their market value, ensuring accurate representation of their share in the target market.
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