What Is the Laspeyres Price Index?

The Pax index, also known as the weighted composite index for the reporting period, is an index calculation method proposed by the German scholar Paasche in 1874. It is a variable that is fixed as a weight in the reporting period when calculating the composite index of a group of items. From the history of the development of the index, there are two main methods for compiling the price index: one is a price index weighted by the number of base periods proposed by the German scholar Laspeyres, which is referred to as the Laplace index; The other is a price index calculated by the German scholar Paasche, which is weighted by the number of reports in the reporting period. This index is referred to as the Papillon index for short. The advantage of Laplace index is that using the number of base periods as the weight can eliminate the impact of weight changes on the index, so that price indices in different periods are comparable.

Pax index

But this index also has obvious flaws, it is assumed

The price of the i-th stock in the base period P0i, the price of the i-th stock in the period P1i, and the issue or trading volume of the i-th stock in the calculation period.