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Indices,[object Object],What is an index?,[object Object],The primary purpose of an index is to reflectmovementsin theunderlying market accurately,[object Object],A price index expresses how much the prices concerned have changedduring the day, week, month, year etc,[object Object],Indices are produced primarily for the use of analyzing investment strategies and as a measure of portfolio performance for professional investors such as pension funds, insurance companies and other institutional investors,[object Object]
Indices,[object Object],Price on the first day set as 100 = basis index,[object Object],Prices over next 4 days expressed as relative indices to the basis price,[object Object]
Indices,[object Object],Single stock index,[object Object],Price index value = Share Price / Divisor,[object Object]
Indices,[object Object],What was the % movement in the share price from the 1st of Jan to the 4th?,[object Object],Composite indices,[object Object],consist of share prices of more than 1 share,[object Object]
Indices,[object Object],Market-value (Capitalization) weighted index,[object Object],Weights shares according to their total market capitalization,[object Object], Is the most important type,[object Object],All major indices are Ex. S&P 500,[object Object],Price-weighted index,[object Object],Weights shares only according to share prices,[object Object],Equally-weighted index,[object Object],Weights each share in the index equally,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],Market capitalization,[object Object],Share price x Total Shares Issued,[object Object],Companies are weighted according to their market cap with respect to the total market,[object Object],Example: ,[object Object],Company A has a total market cap of R1,000,000,[object Object],The market as a whole has a market cap of R20,000,000. ,[object Object],Then company has a weight of (1,000,000/20,000,000) X100 = 5% in the index.,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],Formula for calculating,[object Object],∑ (pi x si x fi),[object Object],Divisor,[object Object], Where ,[object Object],pi = Stock Price,[object Object],si= Amount of shares issued,[object Object],fi= Free Float Factor,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],Free float factor is the amount of shares which is tradable in the market. Free Float factors are published by the JSE,[object Object],A Free Float factor of 0.8 means 80% of the companies shares is tradable in the market,[object Object],The Divisor is created to allow a constant index value when companies additions, deletions take place,[object Object],It also allows for stock splits not to influence an index value,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],Portfolio strategy,[object Object],Investor holding a portfolio of all firms in the index in proportion to their market value (ETF),[object Object],Rate of return of the index equals the rate of returns that would be earned by an investor holding a portfolio of all firms in proportion to their market value.,[object Object],Index does not reflect cash dividends paid.,[object Object],Unaffected by stock splits,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],Example,[object Object],Index consists of the following shares:,[object Object],ABSA,[object Object],issued 1m shares and a free float factor of 1,[object Object],Sasol,[object Object],issued 3m shares and a free float factor of 1,[object Object],BOE,[object Object],issued 5m shares and a free float factor of 0.8,[object Object]
Indices,[object Object]
Indices,[object Object],In the above example the index had a percentage change of,[object Object],((103.06 – 100 / 100)) x 100,[object Object],3.06%,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],Example of a company deletion and addition,[object Object],Now assume at the end of 2 Jan BOE is deleted and CellCwith 5m issued shares is added,[object Object]
Indices,[object Object]
Indices,[object Object],Market-value weighted index,[object Object],On 2 Jan the index values stays the same to calculate the new divisor.,[object Object],New Divisor	= Market Value / Index value,[object Object],= 97.8m / 103.06,[object Object],		= 0.95,[object Object],Thus on 3 Jan ,[object Object],Index value = Total Market Value / Divisor,[object Object],=103.45m / 0.9,[object Object],			=108.89,[object Object]
Indices,[object Object],Price-weighted index (e.g. DJIA),[object Object],Add up the value of stocks (share prices) and divide by number of stocks in index,[object Object],High priced stock dominate a price-weighted average ,[object Object],Portfolio strategy ,[object Object],hold 1 share of each stock in the index,[object Object],DJIA measures the return (excluding dividends) on a portfolio that holds one share of each stock.,[object Object],Value of such a portfolio,[object Object],Sum of the prices,[object Object]
Example,[object Object],Indices,[object Object]
Indices,[object Object],Compare changes in the value of portfolio holding one share of each firm and the price-weighted Index,[object Object],Percentage change in index,[object Object], Start ,[object Object],(25 + 100) / 2 = 62.5,[object Object],End ,[object Object],(30 + 90) / 2 = 60,[object Object],Change ,[object Object],(62.5 – 60) / 60 x 100 = -4%,[object Object]
Indices,[object Object],Divisor adjusted when:,[object Object],Stock split occurs,[object Object],Firm is replaced,[object Object],Stock dividend > 10% pays out,[object Object],[object Object]
How representative is this index of the broad market?,[object Object]
Indices,[object Object],A company must measure its performance relative to an index representing the sector the company resides in,[object Object],Example,[object Object],ABSA will look at the Banking Index ,[object Object],Anglo will look at the Gold and Resources Index ,[object Object],Managers performance will also be stated regarding their performance relative to an index,[object Object],Manager B outperformed the ALSI by 4%,[object Object]
Indices,[object Object],FTSE/JSE Africa Index Series: Market-value weighted:,[object Object],ALSI ,[object Object],Top 99% of shares,[object Object],Top40 ,[object Object],The 40 largest shares,[object Object],MID-CAP ,[object Object],Next 60 largest shares, after 40 largest shares,[object Object],SMALL-CAP ,[object Object],Excluding100 largest shares,[object Object],MINI15 ,[object Object],15 largest mining shares,[object Object],FINDI30 ,[object Object],30 largest financial & industrial shares,[object Object],FINI15 ,[object Object],15 largest financial shares,[object Object],INDI25 ,[object Object],25 largest industrial shares,[object Object],RESI20 ,[object Object],20 largest resource shares,[object Object]
Indices,[object Object],International indices:,[object Object],Dow Jones Industrial Average/ DJIA ,[object Object],30 largest blue chip stocks on NYSE ,[object Object],Price Weighted,[object Object],Computed since 1896,[object Object],Best-known measure of the performance of the stock market,[object Object],Standard & Poor’s Composite 500/ S&P 500 ,[object Object],500  largest firms on NYSE ,[object Object],Market cap,[object Object],NASDAQ Composite (,[object Object],All electronically traded shares in USA,[object Object],Market cap,[object Object],NYSE Composite ,[object Object],All NYSE listed stocks,[object Object],Market cap,[object Object],Wilshire 5000 (,[object Object],All NYSE & Amex stocks plus actively traded NASDAQ stocks,[object Object], Market cap,[object Object]
Indices,[object Object],Nikkei 225 ,[object Object],Share index of the 225 largest shares on the Tokyo Stock Exchange in Japan ,[object Object],Market cap,[object Object],Hang Seng,[object Object],All share index of the Hong Kong Stock Exchange ,[object Object],Republic of China ,[object Object],Market cap,[object Object],FTSE (Financial Times of London) ,[object Object],Share index of 100 largest shares on the London Stock Exchange ,[object Object],United Kingdom,[object Object],Market cap,[object Object],Dax,[object Object],All share index on the Frankfurt Stock Exchange in Germany ,[object Object],Market cap,[object Object],Cac,[object Object],All share index on the Paris Stock Exchange in France,[object Object],Market cap,[object Object]
Indices,[object Object],Index funds ,[object Object],Investors today can purchase shares in unit trust funds that hold shares in proportion to their representation in the ALSI as well as other stock indices.  ,[object Object],These index funds yield a return equal to that of the particular index and so provide a low cost passive investment strategy for equity investors.,[object Object]
Indices,[object Object],Bekendstelling van ETF’s/ beursverhandeldefondse op die JSE deurSatrix Managers Bpk (gereg  by die RFD),[object Object],Agtergrond,[object Object],Produkinligting/beskrywing,[object Object],SATRIX 40,[object Object],SATRIX Indi,[object Object],SATRIX Fini,[object Object],SATRIX Resi,[object Object],SATRIX Swix 40,[object Object],Voordele,[object Object],Kostes,[object Object]
Indices,[object Object],Alternative Indices,[object Object],Dividend indices ,[object Object],Represents dividend movements,[object Object],Fundamental Index,[object Object],Is based on accounting values,[object Object]

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