n NISM Certifications
XXI NISM Series XXI-A
Medium

A criticism of a value-weighted index is that -

Practice question from NISM XXI A for PMS - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Small companies have a large influence on the index.

  2. B

    Large companies have a small influence on the index.

  3. Large companies have a disproportionate influence on the index.

    Correct answer

  4. D

    They are not useful for the OTC market.

Why this is the answer

Market-cap weighting causes large firms to dominate the index's movements.

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