Many believe that a price weighted index will not accurately reflect the evolvement in underlying market values because, simply, the $100 stock above might be that of a small company and the $10 stock that of a large company. A change in the price quote of the small company will thus drive the price weighted index (as it makes up a large part of the index) while the combined market values will remain relatively unaffected without changes in the price quote of the large company.
The Dow Jones Industrial Average is an example of a price-weighted stock market index.
- Price-weighted. Wikipedia (English).