Explanation

Price weighting is the correct answer because:

1. Price-weighted indices (like the Dow Jones Industrial Average) weight stocks based on their share prices.
2. When a stock split occurs, the share price decreases proportionally, which would significantly reduce that stock's weight in the index.
3. To maintain continuity and prevent the split from distorting the index value, the divisor of the index must be adjusted.
4. This divisor adjustment affects the calculation for all stocks in the index, thereby changing the weights of all constituent securities.

Why other options are incorrect:

• B. Equal weighting: In equal-weighted indices, all stocks have the same weight regardless of price changes or splits. A stock split doesn't change the equal weighting scheme.
• C. Value weighting: In value-weighted (or market-cap weighted) indices, weights are based on market capitalization. A stock split doesn't change market cap (price × shares outstanding), so it doesn't affect the weights of other securities.

Key concept: Price-weighted indices require divisor adjustments after stock splits to maintain index continuity, and these adjustments affect the weights of all constituent securities.