Example of Stock Market Index

The following six companies constitute the index of democratic republic of Kusadikika.

Calculate the stock market index for today.

In construction or computation of stock index the following should be considered:

1. Option to choose of base year on such to base the price changes

2. The choice of representative securities or firms

3. Combining the securities or firms to construct the index as like employ of geometric mean

4. Employ of appropriate weight to be attached to the securities depending upon their relative significance.

5. The weights or number of firms in a sector is remained constant over a reasonably long duration.