Construct a price-weighted index for these three stocks

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Question - Assume you are provided with the following data:

Stock

Number of Shares

Price  of T

P rice (T+1)

L auren Corp

1,000.000

60

80

Kayleigh co.

10,000,000

20

35

Madison LTD

30,000,000

18

25

Required -

1. Construct a price-weighted index for these three stocks, and compute the percentage change in the series for the period from T to T +1.

2. Construct a market-value-weighted index for these three stocks, and compute the percentage change in the series for the period from T to T+1.

3. Briefly discuss the difference in the results for the two stock indexes.

4. Discuss the three common mistakes that can bias the results against the Efficient Market Hypothesis.

Reference no: EM133115358

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