Investor Glossary-weighted averageInvestor Glossary-weighted averageInvestor Glossary-weighted averageInvestor Glossary-weighted averageInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Weighted Average

The HTML to link to this page
 

A weighted average is an average that adjusts for the frequency of individual values. Here's an example of a weighted average: suppose 20 people are asked to estimate the number of goats Farmer Jones has. One says 4; seven, 5; eleven, 6; and one, 30. To find the weighted average, multiply each value (ie, number of goats) by the number of people who made that estimate, add up the results, and then divide by the number of people. Thus the weighted average is [(1x4)+(7x5)+(11x6)+(1x30)]/(20)= 6.75. In a weighted average, values that are unusual have relatively little effect. In the example, the weighted average was raised relatively little by a very high estimate of 30 goats, because only one person made that guess. A weighted average is used frequently in business and investing. Consensus earnings estimates by analysts, for example, are usually computed by weighted average. The weighted average cost of capital, while more complex than our simple example would indicate, also involves using a weighted average.



Rate this weighted average definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: quality assurance, minority interest, command economy, Zero Cost Collar, APR, annual return, Key Rate Duration, average price per share, ex-dividend date, phantom income, risk management, in escrow, EBITDA, diluted share, option premium, cancelled check, covered put, required rate of return, labor relations, VIX, balance sheet, current ratio, LIBOR, real GDP, 401a, debt service coverage, 1031 exchange, margin rate, 144a, liquidity ratio, class C shares, wholly-owned subsidiary, deferred tax, irrevocable trust, 1035 exchange, stock market close, deferred revenue, implied volatility, reverse mortgage, retained earnings, dividends payable, inflation, stock split, open position, limit order, ex-dividend, FICO score, FTSE, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use