Stock market index, Finance Basics

Assignment Help:

Stock Market Index

Definition of Stock Market Index

An index is a numerical figure that measures relative change in variables between two type of durations.

Examples

If sales in year 2000 are equivalent to Kshs.25 M and for year 2001 Shs.30 M, the sales index would be follows as like:

Sales index = year 2001 sales/ Year 2000 sales

                   = (Shs.30 M/ Shs.25 M) x 100

                   = 120

Year 2001 sales are 120 percent of year 2000 sales; year 2000 is identified Base year.

A stock index hence measures relative changes in values or prices of shares.  The NSE has its base year as year 1966. Twenty (20) companies constitute the index.

The stock index is computed with using of Geometric mean (G.M) follows as like:

Today stock index = [(Today's share price G.M)2  / Yesterday's share price G.M.]X 100

Whereas G.M      =

1428_Stock Market Index.png

Whereas G.M. = P1 x P2 x P3 x P4 ------- Pn = share price of companies such constitute stock index.

N = number of companies

  • When stock prices are increasing, stock market index will increase and vice versa.
  • Stock market index hence is an indicator of investors' confidence in the economy.

Related Discussions:- Stock market index

Debentures and bonds, how can debentures be explained in class in term of g...

how can debentures be explained in class in term of game, role play etc....?

Monitoring costs - agency costs, Monitoring Costs - Agency Costs This ...

Monitoring Costs - Agency Costs This is incurred to prevent undesirable managerial actions. They are meant to ensure that both parties live to the spirit of agency contract. T

Earnings method or earning basis valuation, Earnings Method or Earning Basi...

Earnings Method or Earning Basis Valuation By using the earning valuation method, a company will employ its P/E ratio to value its shares. P/E    =  MV/E MV    =   E x P

Money and banking course, Ask questioSay that a buyer of bonds values good ...

Ask questioSay that a buyer of bonds values good bonds at $500 and values bad bonds at $250. Sellers of both good and bad bonds value them at $350. If the fraction of good sellers

Explain the term- order, Explain the term- Order Brokers receive num...

Explain the term- Order Brokers receive numerous different types of buying and selling orders from their customers. Brokerage orders very as to the price at which order may

Limitations of credit cards - source of finance, Limitations of Credit Card...

Limitations of Credit Cards - Source of Finance Limitations of Credit Cards as a Source of Finance are as follow: i) These cards lead to overspending on the part of the hol

What is the execution of order in the stock exchange, What is the Execution...

What is the Execution of order in the Stock Exchange When broker receives the margin money and is clear about the order received by him, he puts details in the 'order book'.

Factors to increasing the profitability of a business, Factors contribute t...

Factors contribute to increasing the profitability of a business Several other factors contribute to increasing the profitability of a business. For companies that are highly d

FIR 3410, Your client, a man, is currently 35 years old and he wants to re...

Your client, a man, is currently 35 years old and he wants to retire when he is 65 years old (exactly 30 years from now). He would like his retirement income to be equivalent to

#lpp, Solve the following Linear Programming Problem using Simple method. M...

Solve the following Linear Programming Problem using Simple method. Maximize Z= 3x1 + 2X2 Subject to the constraints: X1+ X2 = 4 X1 - X2 = 2 X1, X2 = 0

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd