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FIN4360_Chapter5_Slides

FIN4360_Chapter5_Slides - Investment Analysis and Portfolio...

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Investment Analysis and Portfolio Management by Frank K. Reilly & Keith C. Brown C h a p t e r 5 C h a p t e r 5 Security-Market Indexes Uses of Security-Market Indexes Factors Affecting Market Indexes Stock Market Indexes Bond Market Indexes
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5-2 Uses of Security-Market Indexes As benchmarks to evaluate the performance of professional money managers To create and monitor an index fund To measure market rates of return in economic studies For predicting future market movements by technicians As a substitute for the market portfolio of risky assets when calculating the systematic risk of an asset
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5-3 Factors Affecting Market Indexes The Sample Size Breadth Source Weighting of Sample Members Price-weighted series Value-weighted series Unweighted (equally weighted) series
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5-4 Factors Affecting Market Indexes Computational Procedure Arithmetic average Compute an index and have all changes, whether in price or value, reported in terms of the basic index Geometric average
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