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
Agency Relationship between Auditors and Shareholders Shareholders appoint auditors as per the provisions of Section 159(1)-(6) of the Companies Act. The auditors are believed

Attached is the file for your bond problem. Your group must use the following for the bond problem. In addition, using the general ledger software as described in the project i

how can I get?

After read all the available information carefully, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.50Y

Three of these companies have bonds that carry investment - grade ratings. The other 3 companies carry junk - bond ratings. Judging by the information in the table, which 3 compani

some report about credit bank

Accounting Rate of Return Method or ARR This method utilizes accounting profits from financial status to assess the viability of investment proposal via diving the average inc

what is the ambiguity

Describe the structure of financial systems with financial markets, securities and financial intermediaries. By a structural point of view a financial system can be considered

Payback Period Method - Traditional Methods This method gauges the viability of a venture via taking the outflows and inflows over time to ascertain how soon a venture can pay