Reading 46: Security Market Indices Flashcards Preview

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Flashcards in Reading 46: Security Market Indices Deck (15)
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1
Q

Value of a Price Return Index

46.1

Security Market Indices

A

Where:

VPRI = the value of the price return index

ni = the nubmer of units of constituent security i held in the index portfolio

N = the number of constituent securities in the index

Pi = the unit price of constituent security i

D = the value of the divisor

2
Q

Price Return of an Index (single - period)

46.2

Security Market Indices

A

Where:

PRI = the price return of tehn index portfolio (as a decimal number, i.e. 12 percent is .12)

VPRI1 = the value of the price return index at the end of the period

VPRI0 = the value of the price return index at the beginning of the period

3
Q

Price Return of Each Constituent Security

46.3

Security Market Indices

A

Where:

PRi = the price return of constutent security i (as a decimal number)

Pi1 = the price of constituent security i at the end of the period

Pi0 = the price of constituent security i at the beginning of the period

4
Q

Price Return of Index Equals Weighted Average of Price Returns of Individual Securities

46.4

Security Market Indices

A

Where:

PRI = the price return of index portfolio (as a decimal number)

PRi = the price of constituent security i (as a decimal number)

N = the number of individual securities in the index

wi = the weight of security i (the fraction of the index portfolio allocated to security i)

Pi1 = the price of constituent security i at the end of the period

Pi0 = the price of constituent security i at the beginning of the period

5
Q

Simplified Weighted Price Return of Index Portfolio

46.5

Security Market Indices

A

Where:

PRI = the price return of index portfolio (as a decimal number)

PRi = the price of constituent security i (as a decimal number)

N = the number of individual securities in the index

wi = the weight of security i (the fraction of the index portfolio allocated to security i)

6
Q

Total Return of an Index

46.6

Security Market Indices

A

Where:

TRI = the total return of the index portfolio (as a decimal number)

VPRI1 = the value of the price return index at the end of the period

VPRI0 = the value of the price return index at the beginning of the period

IncI = the total income (dividend and/or interest) from all securities in the index held over the period

7
Q

Total Return of Each Constituent Security in an Index

46.7

Security Market Indices

A

Where:

TRi = the total return of the constituent security i (as a decimal number)

P1i = the price of constituent security i at the end of the period

P0i = the price of constituent security i at the beginning of the period

Inci = the total income (dividend and/or interest) from security i over the period

8
Q

Total Return of an Index Calculated as the Weighted Average of Total Returns of the Constituent Securities

46.8 and 46.9

Security Market Indices

A

Where:

TRI = the total return of the index portfolio (as a decimal number)

TRi = the total return of constituent security i (as a decimal number)

wi = the weight of security i (the fraction of the index portfolio allocated to security i)

N = the number of securities in the index

9
Q

Value of Price Return Index Over Multiple Time Periods

46.10

Security Market Indices

A

Where:

VPRI0 = the value of the price return index at inception

VPRIT = the value of the price return index at time t

PRIT = the price return (as a decimal number) on the index over period t, t=1, 2, …, T

10
Q

Value of Total Return Index by Series of Total Returns

46.11

Security Market Indices

A

Where:

VTRI0 = the value of the price return index at inception

VTRIT = the value of the price return index at time t

TRIT = the price return (as a decimal number) on the index over period t, t=1, 2, …, T

11
Q

Price Weighting

46.12

Security Market Indices

A

Where:

Pi = Price of constituent security i

12
Q

Equal Weighting

46.13

Security Market Indices

A

Where:

wi = fraction of the portfolio that is allocated to security i or weight of security i

N = number of securities in the index

13
Q

Market-Capitalization Weighting

46.14

Security Market Indices

A

Where:

wi = fraction of the portfolio that is allocated to security i or weight of security i

Qi = number of shares outstanding of security i

Pi = share price of security i

N = number of securities in the index

14
Q

Float-Adjusted Market-Capitalization Weighting

46.15

Security Market Indices

A

Where:

fi = fraction of shares outstanding in the market float

wi = fraction of the portfolio that is allocated to security i or weight of security i

Qi = number of shares outstanding of security i

Pi = share price of security i

N = number of securities in the index

15
Q

Fundamental Weighting

46.16

Security Market Indices

A

Where:

Fi = a given fundamental size measure of company i

wi = fraction of the portfolio that is allocated to security i or weight of security i

N = number of securities in the index