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)
    100.0%

  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)
    0.0%

  3. Volume traded weighting - based on the avg number of shares traded on a daily basis

    0 vote(s)
    0.0%

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

    0 vote(s)
    0.0%

  5. Other

    0 vote(s)
    0.0%
  1. IV_Trader

    IV_Trader

    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
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  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
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  3. riskarb

    riskarb

    Equal weighting; top 10% of the components are chosen by market cap. Right, SMH and tech indices.
     
    #13     Aug 2, 2006
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