EI: Security Market Indexes

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9 Terms

1
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 value of a price return index, Vpri =
∑ NiPi / D
2
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An index is made up of two constituent securities, Stock A and Stock B. What beginning divisor must be used to achieve a beginning value of 1,000?
An index is made up of two constituent securities, Stock A and Stock B. What beginning divisor must be used to achieve a beginning value of 1,000?
3\.5
3\.5
3
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Price return, PRi =
Vpri1 - Vpri0 / Vpri0
4
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Total return, PRi =
Vpri1 - Vpri0 + Incomei/ Vpri0
5
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Float  refers to the
regular shares a company has issued to the public available for investors to trade
6
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Rebalancing refers to
adjusting the weights of the constituent securities in the index on a regularly scheduled basis
7
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Price-weighted indices are XXX, and rebalancing is a XXX concern for market capitalization indices as they mostly XXX
not rebalanced

minor

rebalance themselves
8
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Reconstitution is 
the process of changing the constituent securities in an index
9
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The primary uses of market indices are to:
(1) gauge market sentiments

(2) serve as proxies for measuring returns and risk

(3) serve as proxies for asset classes

(4) benchmark active managers

(5) model portfolios for index funds and exchange-traded funds.