Stock market index, Finance Basics

Stock Market Index

Definition of Stock Market Index

An index is a numerical figure that measures relative change in variables between two type of durations.

Examples

If sales in year 2000 are equivalent to Kshs.25 M and for year 2001 Shs.30 M, the sales index would be follows as like:

Sales index = year 2001 sales/ Year 2000 sales

                   = (Shs.30 M/ Shs.25 M) x 100

                   = 120

Year 2001 sales are 120 percent of year 2000 sales; year 2000 is identified Base year.

A stock index hence measures relative changes in values or prices of shares.  The NSE has its base year as year 1966. Twenty (20) companies constitute the index.

The stock index is computed with using of Geometric mean (G.M) follows as like:

Today stock index = [(Today's share price G.M)2  / Yesterday's share price G.M.]X 100

Whereas G.M      =

1428_Stock Market Index.png

Whereas G.M. = P1 x P2 x P3 x P4 ------- Pn = share price of companies such constitute stock index.

N = number of companies

  • When stock prices are increasing, stock market index will increase and vice versa.
  • Stock market index hence is an indicator of investors' confidence in the economy.
Posted Date: 2/1/2013 1:16:27 AM | Location : United States







Related Discussions:- Stock market index, Assignment Help, Ask Question on Stock market index, Get Answer, Expert's Help, Stock market index Discussions

Write discussion on Stock market index
Your posts are moderated
Related Questions
Factors of Capital Structure 1. Availability of securities - This influences the company's employ of debt finance that means such if a company has enough securities, so then

system integration and infrastructure development is the

A company that manufactures electrical appliances is looking at one of its lines (washing machines), where it offers three different levels of specification: Basic which sells for

Internal finance can avoid the agency costs of debt and equity finance. In practice it is the most important source of funding.   (a)  Discuss potential problems of internal finan

1 st bank offers you a car loan at an annual interest rate of 10% compounded monthly. What effective annual interest rate is the bank charging you?  Solution - Calculate

Define Meaning of Investment Meaning of Investment: Investment involves making of a sacrifice in the present with hope of deriving future advantages. Investment has many

The financial data is of little value in its raw form. However, the same may be analyzed and be put in the form more meaningful to the recipients. This is normally done by using va

Characteristics of Investment - Venture Capitalists Venture capitalists, will just invest in a company whether there is a reasonable chance such the company will be successful

Task The following information has been extracted from the accounts of R Ltd., a manufacturer and distributor of home cordless phone in Hong Kong.

Computation of Weights or Proportions In computation of the weights or proportions of different capital components, the following values might be used like as: Mar