Definition of market value-weighted index

index whose components are weighted according to the total market value of their outstanding shares. Also called capitalization-weighted index. The impact of a component's price change is proportional to the issue's overall market value, which is the share price times the number of shares outstanding. For example, the AMEX Composite Index (XAX) has more than 800 component stocks. The weighting of each stock constantly shifts with changes in the stock's price and the number of shares outstanding. The index fluctuates in line with the price moves of the stocks.