What distinguishes a value-weighted index?

A value-weighted index is distinguished by its calculation methodology, which assigns weights to its constituent stocks based on their market capitalization. This means that companies with larger market values have a greater influence on the index's movements than those with smaller market values.

The term "market cap weighted index" refers to this specific approach, as it considers the total market value of a company's outstanding shares when determining each stock's weight in the index. As a result, the performance of a few large companies can significantly affect the overall performance of the index, making it reflective of the market capitalization of the stocks within it.

Other options do not accurately describe a value-weighted index. For instance, an equally weighted index would assign the same weight to each stock without regard to their market values. Weights based on total sales volume are unrelated to how a index is typically constructed. Finally, including only the highest priced stocks does not align with the fundamentals of a value-weighted approach; instead, it disregards the importance of market capitalization as a determinant for stock weight within the index.