The S&P 500 is a market-cap weighted index and the Dow Jones Industrial Average is a price-weighted index. Which pairing is correct?

• A. Equal share / Equal price
• B. Market capitalisation / Price
• C. 500 stock / 30 stock
• D. Price / Market capitalization

Answer: (B)

Weighting determines how much each stock moves the index. The S&P 500 uses market capitalization weighting, so bigger companies by value have more influence on the index. The Dow Jones Industrial Average uses a price-weighted method, so stocks with higher share prices move the index more, regardless of the company’s size. Therefore the correct pairing is market capitalization for the S&P 500 and price weighting for the Dow.

For context, equal weighting would give every stock the same impact, which neither index uses. The numbers of stocks describe composition, not weighting, and reversing the pairing would incorrectly assign the opposite weighting to each index.