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Which of the following statement is incorrect for Dow Jones Index? A. Puts higher weights on...

Which of the following statement is incorrect for Dow Jones Index?

A. Puts higher weights on stocks with higher price

B. Index return is sensitive to stock split

C. Not representative of entire market

D. None of the above

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Answer #1

Answer:

OPTION A: Puts higher weights on stocks with higher prices

Reason: Dow Jones Index does not put higher weights on stocks with higher price. A share having higer price is nothing to do with its weight, it is on the basis of market capitalisation that weights are allocated. For example: Alphabet's price might be lower than a few other stocks but its market capitalisation is much higher so it does not necessarily mean if the price of teh stock is higher then its weight on teh index will be more.

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