Final answer:
Numerical measures such as the DJIA, S&P 500, and Wilshire 5000 are used to evaluate stock investments and market performance. These indices provide an average based on the stock prices of different subsets of companies and are considered major indicators of market trends.
Step-by-step explanation:
Evaluating Stock Investments Using Numerical Measures
To evaluate stock investments, the market uses several numerical measures to gauge the performance of the stock market and, by extension, corporations. Three major indicators include the Dow Jones Industrial Average (DJIA), the Standard & Poor's 500 (S&P 500), and the Wilshire 5000. The DJIA represents 30 significant U.S. companies, the S&P 500 encapsulates the 500 largest U.S. companies, and the Wilshire 5000 encompasses nearly all publicly traded U.S. companies. These indices average the stock prices of their respective subsets of companies, providing insight into market trends and corporation performances.
Furthermore, market capitalization and price-weighting are other numerical measures providing different perspectives on stock valuation. The S&P 500 is a market capitalization-weighted index, meaning companies with higher market caps have more influence on the index movement. The DJIA is a price-weighted average, where higher-priced stocks have a larger impact on the index's movements. Additionally, other stock market measures consider where stocks are traded, like the New York Stock Exchange and the Nasdaq, which includes a broad swath of stocks, with a focus on technology stocks.