S&p cnx 500, Financial Management

Assignment Help:

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.

 


Related Discussions:- S&p cnx 500

What difference does it make ordinary annuities, If you are doing PVA and F...

If you are doing PVA and FVA problems, what difference does it make if the annuities are "ordinary annuities" or "annuities due"? In PVA or a FVA of annuity due trouble, annuit

Cost of capital, the nu-nu brothers inc. (NNBI) has the following capital s...

the nu-nu brothers inc. (NNBI) has the following capital structure,

Define finance function and discuss its nature, Q. Define Finance Function ...

Q. Define Finance Function and discuss its nature and scope Ans. Meaning of Finance: - Finance is defined as the provision of funds at the time when it is required. The role of

Types of working capital, TYPES OF WORKING CAPITAL Working capital can ...

TYPES OF WORKING CAPITAL Working capital can be split up into two categories on the basis of time. They are Permanent Working Capital and Temporary or Variable Working capital

Restrictions on investments, Restrictions on Investments: A mutual fund...

Restrictions on Investments: A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment

Debt securities, Fixed income security is a financial obligation of an ...

Fixed income security is a financial obligation of an entity, which promises to pay a pre-specified amount of money at per-specified date. Debt securities (

Security offered - influence the rate of interest, Q. Security offered -  ...

Q. Security offered -  influence the rate of interest ? The rate of interest charged on the loan will be lesser if the debt is secured against an asset or assets of the company

Share price movements, The management of Nelson plc wish to estimate their ...

The management of Nelson plc wish to estimate their firm's equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it would

Please help me solve this question, there are 3 compaies i have to find out...

there are 3 compaies i have to find out the price of equity share by using walters and gordons model.

Case study - volatility trading, Case Study: Volatility Trading (a) The...

Case Study: Volatility Trading (a) The understanding in this case study deal with Convertible as well as Reverse-Convertible bonds. These are interesting instruments by themsel

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd