Sunday, December 20, 2009

How is a share index computed?

to know about how is share market computed? Indexes are generally computed by adding together the prices of the stocks that are in the index and performing some kind of math calculations on them. I think what those calculations are varies by index. For the Dow Jones Industrial Average, the calculation is done by adding together the price of the 30 stocks in the index and then dividing by a number (currently 0.123017848) which compensates for all the stock splits, spinoffs, etc. that have occurred over time. The first referenced link provides more information about Dow Jones Indexes.

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