Which of the following considers the size of the company and needs no adjustment for stock splits?
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A. B. C. D.B
The correct answer is B. Capitalization weighting.
Capitalization weighting is a method of calculating the value of a stock market index by taking into account the total market value of all the companies included in the index. This is also known as market cap weighting.
Market capitalization is calculated by multiplying the number of outstanding shares of a company by its current stock price. This means that larger companies with higher stock prices will have a greater weight in the index than smaller companies with lower stock prices. Therefore, capitalization weighting already considers the size of the company, and no adjustment for stock splits is necessary.
On the other hand, price weighting is a method of calculating an index where the stocks are weighted based on their price per share. This means that stocks with higher prices have a greater weight in the index, regardless of the size of the company. Price weighting does not consider market capitalization and may require adjustments for stock splits.
Equal weighting is a method of calculating an index where each stock in the index is given an equal weight. This method does not take into account the market capitalization or the price per share of the stocks in the index.
Base weighting is not a commonly used method for calculating stock market indices, and it is not related to the size of the company or stock splits.