Price Weighted Index question, original, 2010, because

suxiaoxiao

In schweser mocks vol. 1 p.148 question 88, it talks about a price weighted index and the effects of a split on one stock in a 2 stock index.

One stock increases and the other splits. However they use the original pre-split price for calculating the index instead of the new price under the split.

Why is this? I thought price weighted indexes had downward bias because of this fact...

Last minute help?



Edited 1 time(s). Last edit at Friday, June 4, 2010 at 08:11PM by nickfaulkner.