A price-weighted index is a stock index that requires each company included in the index to be weighted according to its current share price. For the weight of each security, we divide its price by the sum of all securities’ prices included in the index. To determine the index value, we divide the sum of all security values by the divisor, which, at inception, equals the initial number of securities in the index. Both the price return and the total return of the index are calculated on the basis of the corresponding returns on the constituent securities.

Some other related topics you might be interested to explore are Equal-weighted index, Market-capitalization weighted index, and Float-adjusted market-capitalization weighted index.

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Price-weighted index is among the topics included in the Portfolio Management module of the CFA Level 1 Curriculum.