Indecies

Question 1

market cap

Answer 1

share price * outstanding shares

unaffected by split

Question 2

Price weighted indecies

Answer 2

sum of stock prices / n of companies

priciest stock has the biggest influence

DJIA is an example

Question 3

PWA and splits

Answer 3

splits will change the stock price and we will have to adjust

Question 4

Handling splits

Answer 4

1. multiply numerator by split ratio
2. use market cap because it is not affected by split
3. find a new divisor using the new stock price

Question 5

Value weighted indicies

Answer 5

weight = company market cap / total market cap

follow the highest MC / weight

Question 6

Calculating new value index

Answer 6

multiply the old equity value by 1+% change