Value-weighted index Value-weighted index More commonly used(e.g S&P 500, Hang Seng Index, NASDAQ, FTSE-100) To determine the index level, we weight each stock according to the ratio of its market value to total market value of all the stocks in the index Mv, is the total market capitalization of all n index stock n, is the number of shares outstanding for stock I at timet The divisor is set such that the base index level equal 100 The index level at time t is computed as The divisor changes whenever the index composition changes
Value-weighted index • Value-weighted index – More commonly used (e.g. S&P 500, Hang Seng Index, NASDAQ, FTSE-100) • To determine the index level, we weight each stock according to the ratio of its market value to total market value of all the stocks in the index – is the total market capitalization of all N index stock – is the number of shares outstanding for stock I at time t – The divisor is set such that the base index level equal 100; – The index level at time t is computed as – The divisor changes whenever the index composition changes ∑= = N i MVt nit Pit 1 MVt nt
Value-weighted index Example. Suppose you begin a price-weighted index of stocks a and b which have, respectively, 10, and 100 shares outstanding stock pric market value stock a stock B stock A stock b total price divisor index level 406006406.410 )7506411875 806006806.41106.25 stock a is removed for C which has 100 shares which has 100 shares(@S10 per share stock c stock c 1061006001160015.05910.25
Value-weighted index • Example. Suppose you begin a price-weighted index of stocks A and B which have, respectively, 10, and 100 shares outstanding t stock A stock B stock A stock B total price divisor index level 0 4 6 40 600 640 6.4 100 1 5 5 60 500 560 6.4 87.5 2 6 7 50 700 750 6.4 117.1875 3 8 6 80 600 680 6.4 106.25 stock C stock C 10 6 1000 600 1600 15.059 106.25 stock prices market value stock A is removed for C which has 100 shares which has 100 shares @$10 per share
Hang Seng Index Comprise 33 constituent stocks which are representative of the market The aggragte market capital ization of these stocks account for about 70% of the total market capitalization of the hong Kong stock market Select criteria Must be amon those that constitute the top 90% of the total market capitalization of all ordinary shares listed on the sehk(market capitalization is expressed as an average of the past 12 months. Must be among those that constitute the top 90% of the total turnover on the sehK Should normally have a listing history of 24 months Should not be a foreign company as defined by the sehK
Hang Seng Index • Comprise 33 constituent stocks which are representative of the market. The aggragte market capitalization of these stocks account for about 70% of the total market capitalization of the Hong Kong stock market. • Select criteria – Must be amon those that constitute the top 90% of the total market capitalization of all ordinary shares listed on the SEHK (market capitalization is expressed as an average of the past 12 months.) – Must be among those that constitute the top 90% of the total turnover on the SEHK. – Should normally have a listing history of 24 months. – Should not be a foreign company as defined by the SEHK