A. Describe a security market index.

Question 1

Security Market Indices provide a measure of the value of a class of securities

Answer 1

A security market index represents the performance of an asset class, security market, or segment of a market. The performance of the market or segment over a period of time is represented by the percentage change in (i.e., the return on) the value of the index.

The classes of securities may be broad
or narrow:
– All investable assets
– An asset class
– A security market
– An industry

When using a security market index to represent a market’s performance, the performance of that market over a period of time is best represented by: the percent change in the index value.

Percentage changes in the value of a security market index over time represent the performance of the market, segment, or asset class from which the securities are chosen.

A security market index is best described as a: A security market index is a group of securities (the constituent securities) designed to represent the performance of an asset class, security market, or market segment.