hintapainotteisesti

Hintapainotteisesti is a Finnish term that translates to "price-weighted" or "weighted by price" in English. It is often used in the context of financial markets, particularly when referring to stock market indices.

In a price-weighted index, the constituent stocks are included in the index based on their share price. Stocks with higher share prices have a greater influence on the index's movement than stocks with lower share prices, regardless of the company's overall market capitalization. For example, if a stock priced at $100 per share increases by $1, it will have a larger impact on the index than a stock priced at $10 per share that also increases by $1.

The Dow Jones Industrial Average (DJIA) is a well-known example of a price-weighted index. While this method is straightforward to calculate, it has limitations. It doesn't accurately reflect the relative size or economic importance of the companies within the index. A company with a very high share price but a relatively small market capitalization can disproportionately influence the index, while a company with a lower share price but a much larger market capitalization might have less influence than its actual economic weight would suggest.

Other indexing methodologies, such as market-capitalization-weighted indices (where influence is based on the total market value of a company's outstanding shares), are more commonly used today for this reason. Market-capitalization-weighted indices are generally considered to be more representative of the overall market performance.