What books do you recommend for 'calculation of stock indices'?

Question

Hello, guys.
I'm doing my presentation on 'INDICES', but I don't know any sorce to look for. It may seem strange, but searchers didn't help.
Are there any web pages for it? Any books? Anything?

Answer 1

You couldn't have done much of a search. I typed in "How are stock indicies calculated" and got dozens of sites ecplaining it. One link is below.

The fact is, there isn't much to it.

1. The Dow jones Industrial Averages.

30 stocks are picked to be in the index. To find the index value, add the prices of the 30 stocks together and divide by "the factor."

What is the factor? If you made your own index, you would start off with 30 -- so you would get an average. But every time a stock splits, a stock pays a dividend or you replace one stock with another, you have to adjust the factor to reflect the reinvestment.

S&P 500. The index started out with a value of 100. To calculate the new vallue, multiply the old value by the gross return of the index. The gross return is calculated as follows:

Take each of the 500 prices and multiply them by the shares outstanding for each company. Add them all together. Do the same thing using the previous day's closing prices. Divide the value today by the previous value. That is the return.

The S&P 500 does not reinvest dividends paid.

I used to work at Dow Jones where I built their system to track stock prices. My system also calculated the Dow Jones Averages.

Answer 2

Devil Take the Hindmost: A History of Financial Speculation - by Edward Chancellor