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

Determinants of required rate of return, Determinants of Required Rate of R...

Determinants of Required Rate of Return 1.Risk free rate - This is the interest rate such would exist on default free securities like Treasury bills and bonds. Risk free

Comparison between debt finance and ordinary share capital, Comparison betw...

Comparison between Debt Finance and Ordinary Share Capital Differences between Debt Finance and Ordinary Share Capital as Equity Finance as   Ordina

Stock repurchase, Stock Repurchase The company can buy back also sever...

Stock Repurchase The company can buy back also several of its outstanding shares instead of paying cash dividends. This is identified as stock repurchase and or bought back or

Finance.., the nominal fee interest rate in your account is 7% your semi-an...

the nominal fee interest rate in your account is 7% your semi-annually rate of interest APY will be?

Characteristics of investment - venture capitalists, Characteristics of Inv...

Characteristics of Investment - Venture Capitalists Venture capitalists, will just invest in a company whether there is a reasonable chance such the company will be successful

Eye field - vertebrate eye, Eye Field - Vertebrate Eye The development...

Eye Field - Vertebrate Eye The development of eyes starts with evagination of the lateral wall of the forebrain. one on each side, which make the optic vesicles. By vital dye

Different risk-profile - shareholders and management, Different Risk-profil...

Different Risk-profile - Shareholders and Management Shareholders will generally prefer high-risk-high return investments while they are diversified that is they have many inv

Stewardship accounting, Stewardship Accounting Shareholders contribute...

Stewardship Accounting Shareholders contribute capital that is provided to the directors that they employ and at the end of each accounting year render an explanation on the a

Interpolation method, Interpolation method Consequently, r denote...

Interpolation method Consequently, r denotes required rate of return Consequently, r = 14 percent + (15 percent - 14 percent) x 253 .646 /253 .646 + 5.375

Trading mechanism, Trading Mechanism 1. An investor approaches broker...

Trading Mechanism 1. An investor approaches brokers who obtain his bid or prefer to the trading floor. 2. At the trading floor, the selling and buying brokers meet and sea

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