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F105 > Chapter 15 > Flashcards

Chapter 15 Flashcards

1
Q

Uses of indices

A

Movements
Portfolios
Analysis
Index funds
Derivative
Standard
Valuation
Picture
Comparison

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2
Q

Two problems when constructing indices of unlisted or illiquid assets

A
  1. The lack of reliable and up-to-date price data
  2. The heterogeneity of the assets included
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3
Q

Obtaining price data

A

Unique
Changes
Subjective
Different
Infrequent
Confidentiality

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4
Q

Choice of index

A
  1. Popularity - how widely followed is the index by various classes of investors?
  2. Benchmarking - is the index used as a benchmark for European equity mandates?
  3. Frequency - how often is the index published?
  4. Total return/withholding taxes - would need to be a total return index (preferably net of withholding taxes)
  5. Method of index construction
  6. Frequency of updates to constituents (or any weightings)
  7. Capitalisation weighted or based on some other weighting process
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5
Q

International Equity indices

A
  1. FTSE Global Equity Index series
  2. Morgan Stanley Capital International indices
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6
Q

FTSE Global Equity Index series

A

Factors
1. 8000 securities
2. 48 countries
3. 98%

Segments:
1. Developed
2. Advanced emerging
3. Secondary Emerging

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7
Q

Morgan Stanely Capital International indices

A

These are a widely used series of international equity indices covering both developed and emerging markets. They are calculated on a market capitalization-weighted arithmetic basis and total returns are published both gross and net of withholding tax.

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8
Q

Portfolio-based indices

A

Rental values, capital values, or total return
Different
Underlying portfolio
Size, regional spread, and sector weighting

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9
Q

Barometer indices

A

The Barometer type of index aims to track movements in the property markets at large by estimating the maximum full rental values of a number of hypothetical rack-rented properties.

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10
Q

UK indices

A

FTSE 100 Index
FTSE 250 Index
FTSE 350 super sector Indexes
FTSE Small cap index
FTSE All-share index
FTSE fledgling index
FTSE AIM index

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11
Q

FTSE UK Index series characteristics

A

Indices covering the whole quoted UK equity market
All indices are to be calculated on a weighted arithmetic average basis
Market capitalizations as weights

Published information:
Average dividend cover
Actual dividend yield
Price-to-earnings ratio
Ex-dividend adjustment

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12
Q

FTSE 100 Index

A

100 largest quoted companies
80% of total UK market capitalization

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13
Q

FTSE 250 Index

A

250 companies below the top 100

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14
Q

FTSE 350 Supersector indexes

A

Derived from FTSE 100 and FTSE 250

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15
Q

FTSE Smallcap index

A

Covers companies below the top 350
2% of the UK market capitalization

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16
Q

FTSE Allshare index

A

Represents 98-99% of the UK market capitalization

17
Q

FTSE Fledgling index

A

Contains sufficiently marketable, quoted companies too small to be in the small-cap index

18
Q

FTSE AIM index

A

Covers companies in the UK alternative investment market
Companies too small to apply for indices

19
Q

USA indices

A

Dow Jones
S&P500
NASDAQ

20
Q

Dow Jones

A

30 Shares
Unweighted
Quick guide
Limited use for a gauge of market performance

21
Q

Standard & Poor’s

A

Composite index
Weighted arithmetic index
A broad cross-section of all sectors

22
Q

NASDAQ

A

Composite index
All common stocks traded in the NASDAQ market
NASDAQ 100 is the basis for stock index futures

23
Q

Japan indices

A

Nikkei
Topix

24
Q

Nikkei

A

225 constituents but not the largest 225 companies
50% of the market value of the Tokyo exchange

25
Q

Topix

A

The Tokyo stock exchange first index
Approximately 1700 shares
Weighted arithmetic index

26
Q

Germany

A

DAX - real-time index of thirty leading shares, it is a total return index

27
Q

France

A

CAC - The main market index is the CAC general index, comprising 250 shares.
The CAC-40 consists of 40 of the largest stocks and was introduced as a vehicle for futures contracts

F105 (18 decks)

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