K. Compare Types of Security Market Indices

Question 1

Security Market Index Issues

Answer 1

• What are differences in
– underlying risks
– weighting schemes
– rebalancing requirements
– reconstitution frequencies
• Is the index investable?

Question 2

Types of Sec. Market Indices

Answer 2

Security market indexes available from commercial providers represent a variety of asset classes and reflect target markets that can be classified by:

Geographic location, such as country, regional, or global indexes.
Sector or industry, such as indexes of energy producers.
Level of economic development, such as emerging market indexes.
Fundamental factors, such as indexes of value stocks or growth stocks.

an example of a market capitalization weighted index: MSCI All Country World Index.

The MSCI All Country World Index is a market capitalization weighted index. The Dow Jones Industrial Average and the Nikkei Stock Average are price-weighted indexes.

price-weighted indices: The Dow Jones World Stock Index, the Russell Index, the S&P 500 Index, and Morgan Stanley Capital International Index are all market-value weighted. Only the Dow Jones Industrial Average and the Nikkei Dow Jones Stock Market Averages are price-weighted.

a price weighted index. he Nikkei Dow Index is a price-weighted

value-weighted indexes. SP, NYSE