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Measuring Stock Market Performance

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Oldest stock market index. Created in 1896 with 12 companies ... For example, news anchor reports that the Dow lost 150 points but the NASDAQ ... – PowerPoint PPT presentation

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Title: Measuring Stock Market Performance


1
Measuring Stock Market Performance
  • Many different indexes measure stock market
    performance
  • Vary by
  • where stock is traded
  • type of business
  • reputation of company
  • size of company

2
Measuring Company Size
  • Market Capitalization is how companies are
    commonly measured for size
  • Market Cap Stock Price x Shares Outstanding
  • Large Cap gt 12 Billion
  • Mid Cap 1 - 12 Billion
  • Small Cap lt 1 Billion

3
Dow Jones Industrial Average
  • Oldest stock market index
  • Created in 1896 with 12 companies
  • Currently tracks 30 companies chosen by editors
    of WSJ
  • Companies are large cap blue chip leaders in
    their fields
  • www.djindexes.com Averages FAQ

4
Calculation of the Dow
  • Originally, the Dow was the sum of the 12 stock
    prices divided by 12
  • Over time, as companies were added, deleted,
    merged, had stock splits, etc., the divisor was
    adjusted to preserve historical continuity
  • You can compare the Dow today to the Dow in 1896
    to see how the value of the stock market has
    grown.

5
SP 500 Index
  • Index kept by Standard Poors that follows the
    500 largest publicly traded companies in the US
    stock market
  • Best measure of large-cap stock performance
  • Preferred by professionals over the Dow to
    measure market performance
  • www.spglobal.com

6
Nasdaq Composite
  • Measures all companies listed on the Nasdaq Stock
    Market
  • Includes over 3000 companies
  • Began in 1971 with a base of 100.00.

7
Russell 2000 Index
  • Russell 3000 Index measures the performance of
    the 3000 largest US companies
  • Russell 2000 Index measures the performance of
    the 2000 smallest companies in the Russell 3000
    Index
  • 8 of total market cap of Russell 3000
  • Widely used to measure small company stock
    performance

8
Wilshire 5000 Equity Index
  • Measures the performance of all U.S.
    headquartered stocks with readily available price
    data.
  • Includes over 5,200 stocks.
  • Broadest measure of market performance.

9
Interpreting Stock Indexes
  • Dont look at absolute point change
  • Look at percentage change
  • For example, news anchor reports that the Dow
    lost 150 points but the NASDAQ only went down by
    30 points - the 30 point drop actually works out
    to be a higher percentage loss!!!
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