Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

EQUITY > Index Prices > Flashcards

Index Prices Flashcards

1
Q

Equally weighted index
Formula
What is it assumes?

A

Numbers of shares doesn’t matter.

Current price
———————- x base value of index
Past price

ASSUMES that will have an equal cash investment is made in each stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

VALUE of an index

A

Base value x (1+ positive returns) x (1-negative returns)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Index Rate of return

A

(1+positives returns) ( 1- negative returns) -1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is Fundamentals Weighted Index
Mainly characteristic (weight)

A

Based on fundamentals = P/E, Book To Value.

MORE weight to stocks with low P/E

others words

Most influenced by “value based” : earnings, dividends, P/B

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Price Wighted Index formula

A

Sum of Stock Prices
——————————-
Number of stocks in index adjusted for splits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Market Value Weighted index assumes

A

That you are doing a proportional market value investment in each company in the index

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Mainly difference between price return and total return

A

Income generate by the assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What composes Value of a total return index?

What about cash flows, they can be negativa?

A

Geometrically linked series of total returns
Including cash flows
CANNOT increase at slower rate or decrease
Cash flows cannot be negatives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Style index is composed by groups classified as:

A

1 ) Market capitalization (Dow jones)
2) Value
3) Growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Sector index is…

A

Measure a performance os securities in a specific industry or industries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the denominator of Value Wighted index
(Market cap index)

A

Free float (market float)
Different, for example, of price index

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

In a a security index, what represents the market performance

A

The percent in index change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How does a Security Market index is managed and constructed?

A

Constructed and managed like a portfolio of securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Most common method of weight for hedge funds

A

Equal weighted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Most common method for Equity Index

A

Market capitalization weight

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Most common method for fixed income securities

A

Market weighted capitalization

17
Q

Phases of a index constructing (4)
TCMR

A
  1. Target market
  2. Construct an index

.Select the securities to use from the target market
. Method of weighting

  1. Managing the index

When rebalancing

  1. Reconstitution of an index

Requires one of its securities goes out of existence

18
Q

Commodity index 3 major factors that affects returns

A

Risk free
Change in futures prices
Roll yield

19
Q

Commodity index are represented by future contracts or spot prices?

A

Future contacts, not spot prices

20
Q

Commodity index methodology of price

A

Equal weighting or
Global production value
But not a specific one

21
Q

Calculation of Price / market weighted

A

(Price ending x Qntds) - (price beginning x qnts)
———————————————————
Beginning price x qntds

22
Q

Wich of the weightings methods requires the most frequent rebalancing?

A

Equal Weighting

23
Q

Sector index provides what about active investment managers?

A

Means to determine if an active investment manager is

more successful at stock allocation or sector allocation

24
Q

Aggregate fixed income index Can by subdivided by what sectors?

A

MARKET SECTOR
Governament
Governament agencies
Collateralized
Corporate

STYLE
Maturity
Credit
Quality

ECONOMIC SECTOR

25
Q

Examples of real state categories index

A

Appraisal index
Repeat sales index

26
Q

Carecteristics Price Weight Inde

A

Stock splits DECREASES weight in index
Most influenced by high priced

27
Q

Market capitalization weight Caracteristics
(Value weighted)

A

Stocks weights goes up and down with
MAKET CAPITALIZATION
Momentum strategy

28
Q

Exemple of a Value Tilt ( more representative in index)

A

Fundamental weighted index

Ex. Looking to a book values companies.

High book values = to high weight in the index

29
Q

Fixed income index

A

Illiquid assets
Not traded with frequency
Construction with Dealers (prices)

EQUITY (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions