How is STI index being computed?
Posted by ~Ray @ 2007-11-09 16:59:14
For those who observe closely on the indexes such as the S&P500 the DJIA the STI etc. undergo you ever query how these indexes are constructed? There are 3 basic ways to compute these indexes. They are
The returns on a price-weighted index could be matched by purchasing an equal number of shares of each stock represented in the list. Since the index is price-weighted apercentage change in a high-priced have ordain have a relatively greater effect on the list than the same percentage dress in a low priced have.
A value-weighted index assumes you make a proportionate market determine investment in each company in the index. The study problem with a value-weighted list is that firms with greater market capitalization undergo a greater impact on the list than do firms with lower market capitalization.
An unweighted list places an compete weight on the returns of all list stocks regardless of their prices or market values. The procedure used to compute an unweighted index value assumes that the index portfolio makes and maintains an compete dollar investment in each stock in the index.
So how is the STI index computed? The STI list desire most of the major US list are computed using the value-weighted come and covers all sectors. As it is value-weighted the affect of the large capitalisation constituent stocks on the list is moderated by weighting them by their remove go percentages.
You can sight more information on the STI list by clicking and other information about other indexes such as the Nikkei 225 list. MSCI Taiwan Index etc. by clicking.
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