Creating an Index

Discussion in 'Strategy Development' started by carltonp, Jul 19, 2011.

  1. Hello traders,

    Can someone please tell me how does one go about creating an index?

    For example, if I followed 10 of my favourite stocks, how would I go about creating an index of those stocks?


  2. wrbtrader


    You need something like TradeStation or similar. I use to do my own custom index in TradeStation many years ago when I used their software. I'm sure there's other programs out there that would allow you to do such.

    In addition, I remember someone here at ET posting several years ago about doing such in excel.

  3. Thanks Mark,

    Compiling an Index using Excel is exactly what I'm after - may be I should have asked the question directly. Anyway, can you think back to did an index in Excel? In the meantime, I'll do a search.

  4. An index of 10 stocks you favor has probably no value whatsoever. Popular indices have value for TA for example simply because they are popular. You will be wasting your time.

    A better analysis would be to see how your portfolio returns correlate to those of a benchmark index like the SP500 for example. Then you will know your alpha and beta.

    Anyway, usually indices are calculate based on market cap weights. They are something like this:

    Index = SUM over i (Pi x market cap i)

    Pi = price of stock i
  5. wrbtrader


    You're welcome. I can't remember whom but there were actually several different custom index ideas I've seen over the years here at ET.

    Not sure if any of them will be suitable for your needs after you do your research to find more info nor can I remember what specific software they were using besides TradeStation or excel.

  6. david22


    carlton i use excel to create an equal weighted index
    for the ftse100 and sp500.

    i simply look at the open, minus the last price which updates
    every few seconds for a basket of stocks. You can also add volume
    and advancer/decliners if you want to experiment with different fields.

    you could use TOS which has a very good excel dde link
    to create your index.

    do a search for the member named edgehunter, he has wrote
    a few posting on creating custom indices.
  7. David22


    Cheers mate...
  8. hello, just curious what would you do with custom index, how would you use it? Thanks.
  9. Bob111


    get some old wealth lab via P2P or rapidshare . there is an add on called something like index lab.
  10. Bob111


    on ET since 2005 and still have no idea?..

    just an example..based on whatever criteria you build a portfolio of stocks(that suppose to outperform the market),put them into index. now you can test them agaist whatever.... then...short etf against it. and you have market neutral portfolio..just one random idea that comes to my drunk brain at this particular moment...
    #10     Jul 23, 2011