6. Financial and Other Indices Flashcards
What is an index?
An index is a measurement of the performance of a country’s stock market, or section of that market.
An index is usually a simple way of summarising?
Market movements,and bell weather of that country’s economy.
What three criteria must be met before company shares can be included in an index
- Majority of shares free-float
- Have full listing on LSE with share price denominated in GBP or EUR
- Meet requirements on nationality and liquidity
Who is an index maintained by?
A sponsor, who may or may not have a direct relationship with the exchange
The FTSE 100 is sponsored by who?
The FTSE Group
What is an exchange traded fund?
A pooled investment that was first developed in the 1990s
Explain its structure?
It is open-ended meaning it is continually receiving and redeeming shares or units of inward and outward investment.
An ETF is a type of fund that owns what?
A type of fund that owns the underlying assets, and divides the ownership of those assets into shares.
Do shareholders directly own the underlying with an ETF?
No. They own a share of the fund shares,which in turn own the underlying
What a ETF shareholders entitled to?
A proportion of the profits, interest, dividends etc
How easily can ETFs be bought, sold or transferred?
Very easily as they are exchange traded, the same way as shares of stock.
What was one of the primary attractions of ETFs
Greater transparency, daily settlement, and calculation of NAV and intraday marketability compared to other pooled investment schemes.
How do most traditional mutual funds, or unit trusts differ from ETFs?
They’re no listed, typically only report holdings less frequently, and can only be invested in at end of day prices.
Originally ETFs were a means of gaining exposure to what?
Major equity indices
ETFs are now available on which asset classes?
Nearly all, including fixed income, commodities.
