| a mean that is computed with extra weight given to one or more elements of the sample. |
| Main Entry: | weighted average |
| Part of Speech: | n |
| Definition: | for a series of recorded observations, the sum of the products of the frequency of certain values and the value of the observation, divided by the total number of observations |
Weighted Average
An average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on the average. Weightings are the equivalent of having that many like items with the same value involved in the average.
Investopedia Commentary
To demonstrate, let's take the value of letter tiles in the popular game Scrabble.
Value: 10 8 5 4 3 2 1 0
Occurrences: 2 2 1 10 8 7 68 2
To average these values, do a weighted average using the number of occurrences of each value as the weight. To calculate a weighted average:
1. Multiply each value by its weight. (Ans: 20, 16, 5, 40, 24, 14, 68, and 0)
2. Add up the products of value times weight to get the total value. (Ans: Sum=187)
3. Add the weight themselves to get the total weight. (Ans: Sum=100)
4. Divide the total value by the total weight. (Ans: 187/100 = 1.87 = average value of a Scrabble tile)
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See also: American Stock Exchange - AMEX, Dow Jones Industrial Average - DJIA, Nasdaq, New York Stock Exchange - NYSE, Weighted, Weighted Average Market Capitalization