S&p cnx 500, Financial Management

S&P CNX 500

Here, the stocks are included as per their respective market capitalization. It includes companies which lead in their respective industry sector. They should closely resemble the sentiments of the market in order to qualify for inclusion in this index. Few other important characteristics of the companies to be included in this index are as below:

  1. Six month period of listing.
  2. Part of share capital with public.
  3. Sufficient liquidity in quantity of shares traded and frequency with which trading took place.
  4. Three years of positive net worth.

At present, this index has 79 companies which are divided into two groups. The first group reflects diversified companies and the second one includes miscellaneous companies. There is no rigidity in terms of number of industries to be included in this index. So is the case with number of industries to be included from a particular segment. It is done primarily because of the fact that the index should be able to reflect true sentiments of the market. The base value of the index is 1000 and the base year for the index is 1994.
The S&P CNX 500 reflects 72% of total market capitalization and 98% of total trading volume. It is one of the best indices that resembles the true market sentiments.

Stock indices reflect market direction as well as day-to-day fluctuations. If one wants to know the market trend as a whole and as to which direction it is moving, there should be one common indicator or index to represent the mood.

There are many reasons as to why people are concerned about the movement of aggregate security prices.

The return on individual stocks is largely dependent on the aggregate market movements. Investors would like to see the increase in share prices of their portfolio attuned to the upward mobility of an index. Investors generally compare their holdings with movements of the indices and the returns associated with them and so on. Although the returns on individual share prices are a product of a large number of economic and political events, a significant portion of such events affects the prices of all securities. Many investors believe that the market tends to move on identifiable patterns.

Investors believe that the size and direction of current moves can be related to historical movements and be used to determine the correct timing for buying or selling the securities.

  • The prices of securities also depend upon various stock market indices.
  • Each underlying index implies a separate portfolio strategy.
  • There are a variety of indications now available but none tells the whole story of the market. On a given day, the indices may differ from one another, but over a period of time all indices generally move together.

 

Posted Date: 9/10/2012 6:47:41 AM | Location : United States







Related Discussions:- S&p cnx 500, Assignment Help, Ask Question on S&p cnx 500, Get Answer, Expert's Help, S&p cnx 500 Discussions

Write discussion on S&p cnx 500
Your posts are moderated
Related Questions
Uses of Index Numbers 1. Establishes trends Index numbers when analyzed reveal a general trend of the phenomenon under study. The available figures for inflation based

discuss an operating cycle of vegetable growing in Uganda

#What are the food and beverages industry financial ratios for 2011,2010,2009? 1. Liquidity(current/quick), Asset Management(Inventory Turnover, total assets turnover),Debt Menagem

Can you help me out on the Time value of money????? I need urgent help on this topic...

Define the first aspect of capital budgeting decision The first aspect of capital budgeting decision relates to the choice of new asset out of the alternatives available or rea

Question: i) What are the rationales of interest swaps? ii) You are the corporate treasurer of LSE International Inc. Your firm, rated as AAA, is able to raise capital in

How Compound values can be calculated on anannual basis Compound values can be calculated on anannual basis, or on a half-yearly basis or on a monthly basis or on continuous ba


Crown casino recently announced its intention to build a new 500-room luxury hotel in Perth costing approximately $568 million. As part of the agreement, the WA government has agre

What is Performance ratios ROCE Return oncapital employed (ROCE)= (Profit before interest and tax (PBIT) / Capital employed) * 100% ROCE measures profitability and illu