Custom Indices - Best way to calculate?

Discussion in 'Trading' started by cashonly, Jul 23, 2006.

What type of index is most representative:

  1. No weighting - all stocks equal

    2 vote(s)
  2. Market Cap weighting - based on the market cap of each stock in the index to the market cap of the i

    0 vote(s)
  3. Volume traded weighting - based on the avg number of shares traded on a daily basis

    0 vote(s)
  4. Avg Value traded weighting - the avg value traded (as calculated by avg daily shares * most recent c

    0 vote(s)
  5. Other

    0 vote(s)
  1. I see. I don't think your will get a clear advice with what weighting to go ; its really up to you. You also must have an upfront rules how to handle future additions/delisting ( and this is not so easy as its sounds). Here are some scenarios :
    1. Buyouts and mergers
    2. Add new
    3. Delete existing
    4. Dividends ( for total return)

    BTW , never heard of volume weighting.
    #11     Jul 28, 2006
  2. cashonly

    cashonly Bright Trading, LLC

    I was thinking that it would give more weighting to stocks that are in play more than usual. Just a thought.
    #12     Jul 29, 2006
  3. Equal weighting; top 10% of the components are chosen by market cap. Right, SMH and tech indices.
    #13     Aug 2, 2006