"A good Stock Index captures the movement of the well diversified and highly liquid stocks. It is the pulse rate of the economy. Index movements reflect the changing expectations of the stock market about future dividends of the corporate sector. Importance of Stock Market Index • To judge the performance of individual investor • To measure the market rates of return • To predict the market movements Factors affecting the construction of stock market index • Sample: It should be representative of total population • Base year: It should be a normal year • Weighting criteria – Equally Weighted Series – Price Weighted Series – Market value Weighted Series. Source: http://in.docsity.com/en-docs/Markets_for_Investment_and_Construction_of_Indexes_-_Security_Analysis_and_Portfolio_Management_-_Solved_Quiz_"
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