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


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