Righty-o, I got that. The part I was missing (in my late-night muddled thinking) was the fact that they produce the number every month, therefore you can tell where the changes come from (at least by month). It seems like it's not really an index meant to determine the value of the asset class, but more track the change of the value of the asset class, no? TNG
I think that all indices track the change in value of an asset class and not value an asset class. For example, an equity index does not give you the value of the equities it represents.
For a while now, Interactive Brokers lets you trade the CME housing derivatives. The 'ticker' symbols are in here http://www.interactivebrokers.com/en/trading/exchanges.php?exch=globex&showcategories=&ib_entity=llc Anyone know where I can get graphs of these CME housing derivatives, price and volume since they started trading?? PS You heard about the IB IPO? http://www.247wallst.com/2006/11/interactive_bro.html
"I think that all indices track the change in value of an asset class and not value an asset class. For example, an equity index does not give you the value of the equities it represents." you think wrong. and you are opining on a factual matter you are woefully ignorant on. that's kind of dangerous. feel free to research. indices DO track (whether through capitalization weighting, price weighting, or equal weighting etc.) the values of the equities they represent divisors are changed accordingly based on the weighting changes, etc. but the dow is a # based on the value of 30 stocks. those stocks are price weighted in the index (contrast with the S&P , which is cap weighted, or the S&P equal weighted index (SPEWI) which is equal weighted) accordingly. the final # *is* the value of the dow
guy2 said "GIVE YOU the value". whitster said "TRACK the value". If we really want to argue about this, they need to use more specific verbs and provide examples. Of course for the DOW or S&P indices, they don't actually go out and buy the stock; for the CME Housing Futures nobody actually buys any houses. It would be better to use the term "underlying" than "equities they represent". Does not have to be an equity = "securities that represent ownership in a corporation." The underlying could of course be a delivery contract for port bellies, wheat, or coffee for that matter. One thing I don't quite understand with equities index futures is: what "happens to" the dividends.
****guy2 said "GIVE YOU the value". whitster said "TRACK the value". If we really want to argue about this, they need to use more specific verbs and provide examples. **** totally a nonissue. this is what guy2 said. i quote "I think that all indices track the change in value of an asset class and not value an asset class. For example, an equity index does not give you the value of the equities it represents." that is demonstrably false. EXACTLY what an equity index does is GIVES YOU THE VALUE of the equities it represents. his response is completely wrong. the exact opposite is true. and i explained why. "Of course for the DOW or S&P indices, they don't actually go out and buy the stock;" how is this relevant? indices TRACK something. they are not ownership of something. duh indices don't OWN anything. they are a tracking mechanism to aggregate the values of several entities (in the case of the dow, a price weighted average of 30 stocks) the value of an index is EXACTLY the value of the underlying entities, multiplied by whatever divisor is necessary (depending on whether it is price weighted, cap weighted, equal weighted etc.) " for the CME Housing Futures nobody actually buys any houses. It would be better to use the term "underlying" than "equities they represent". Does not have to be an equity = "securities that represent ownership in a corporation." The underlying could of course be a delivery contract for port bellies, wheat, or coffee for that matter. One thing I don't quite understand with equities index futures is: what "happens to" the dividends." nothing "happens" to them. futures are not "stuff". they are AGREEMENTS if you buy a stock, you buy a piece of a company. the company (if it pays dividends per share) pays you a portion of its profits to you, int he form of dividends, since you are a partial owner of the company a person who buys a futures contract owns merely an AGREEMENT on the future value of an underlying (whether an index, a stock (see: SSF's), a commodity, or whatever) the future (the front month) will GENERALLY track the underlying, with the pricing in of course of differentials of carrying costs (in the case of commodities), dividends, and t-bill rates (riskless interest) that differentiate the holding of a CONTRACT (with a performance bond) vs. the holding of a an actual THING (a stock or an ounce of gold, or whatever) futures are designed for hedging, speculation, offsetting of cash positions, etc. due to the presence of abritrageurs, program/basket trading, etc. GENERALLY speaking, a futures contract for a group of stocks will closely track its representative index, or else arbitrageurs will bring it back inline since they can make riskless profit by selling one and buying the other, for a fungible riskless arb opp but to put it briefly, indices don't OWN anything. they are a metric. futures don't OWN anything either. they are an agreement. if i buy a bunch of shares of the dow 30 stocks, in a representative weighting of the index, i OWN a basket of stocks that will move EXACTLY with the DJIA, since it IS the group of stocks, in proper weightings, that IS the DJIA. or i could just buy DIA. technically speaking, DIA can diverge (slightly) from the value of the underlyings, since it is actively traded on its own, but it represents a nice proxy, and the deviance will be minimal due to arbitrage if i buy a FUTURES contract, otoh, i own no stock, thus i get no dividends. i own an AGREEMENT. there is necessarily somebody else who owns the other side of my agreement (if i go long YM at 12,000, somebody must be short at that price necessarily since it is a zero sum game), and my contract's gains are the other contracts losses and vice versa. that's all it is. an agreement. that agreement will become a cash settled exchange of funds ON the date of futures expiration if i buy a stock, i am buying a THING. thus, somebody has to sell me an actual SHARE of stock, and those are limited in # (it's called the float) and cannot be created out of thin air (don't get me started on naked shorting otoh...). the difference is that there is not exactly one share of stock short, for each share of stock long. contrast that with the futures contract. heck, some stocks can have ZERO shares short whereas futures contracts, since they are agreements not things, HAVE to have an exact equal # of long and short housing futures, like ANY futures, are merely agreements. if there is (and this is a big if) an easily fungible, liquid instrument (or set of instruments) to arb it against (see: DJIA stocks), then it's value will HAVE to closely track an underlying closely. the less fungible and liquid an underlying is, the less a futures contract HAS to track the value of an underlying.
That is a pretty good explanation, but just to muddy the water, let's say you buy (long) a DJIA index future, and I go out and buy (long) the (properly weighted) actual basket of 30 underlying stocks. On the futures expiration date, I have more money than you, because I collect any dividends. When I said "happens to" its pretty bad wording... nothing "happens to" any dividend in the index futures contract because nobody bought any stock and nobody collected any dividend. But can the same be said for index FUNDS? Anyway, another aspect that would further the point you and others are making is, if we could find any charts for these indices, they'd probably show very low volume, confirming that they're unpopular. And worse, as pointed out above, illiquid... you may have difficulty bailing out of your position.