Security -Market Index

Security market indexes are used in the following ares of investment management:

Measuring porfolio performance over various time periods.
Helping in the construction of index portfolio.
Evaluating the financial variables that influence overall security price movements.
Aiding market technicians in their investment decisions.
Helping in the calculation of beta and portfolio theory studies.

Price-weighted index is the arithmetic average of current security prices.
Price-weighted index = sum of stock prices/ # of stocks in index adjusted for splits

Price-Weighted indexes: Dow Jones Industrial Average(DJIV) and the Nikkei Dow Jones Stock Average.

Cristicism of the DJIA that contains 30 stocks are:

Limited number of stocks in the index. 样本小
Downward bias in the computation of the index.
Large size of the companies included in the index.

The Nikkei Dow is the arithmetic average of the prices of 225 stocks that trade in the first section of the Tokyo Stock Exchange.

Market value-weighted index is calculated by summing the total value of all the stocks in the index - Standard & Poor's 500 (S&P 500) 标准普尔

Unweighted index places an equal weighted onthe returns of all index stocks. 计算方法有两种：
算术平均法和几何平均法，前者总是大于后者。

三种方法的偏见：

对于价格权重方法的偏见是指数被低估，原因是大公司运用股票分割频繁造成股价下降，但是此方法却无法体现。

对于市值权重发的偏见是指数的波动受大公司影响严重，因为大公司的市值比重比较大。因此大公司们的表现业绩即涨跌主导这指数的动向。

无权重发的偏见是几何平均数要比算术平均数小。


Domestic and Global Equity Indexes:

Domestic Equity Indexes: DJIA in the U.S. & Nikkei DJIA in Tokyo Japan.

Global Equity Indexes:

Financial Times/S&P Actuaries World Indexes are based on about 2500 stocks from 30 countries.
Morgan Stanley Capital International (MSCI) Indexes are made up of three international, 19 national, and 38 international industry indexes.
Dow Jones World Stock Index represents 2200 companies from around the globe, organized into 120 industry groups.

Bond market indexes:

the creation of bond market indexes is more difficult than stock market indexes for several reasons:

The bond universe is much broader than the universe of stocks.
The bond universe is changing constantly due to the wide variety of new issues, bond maturities, calls, and sinking funds.
The price volatility of a bond is constantly changing Volatility is measured by the bond's duration, which changes with the bond's maturity and the market yield.
There are significant problems in pricing the individual bond issues in an index due to the lack of continuous trade data like that found for most exchange-listed stocks.

Bond indexes fall into 3 basic categories:
1. Investment-grade bond indexes
2. High-yield bond indexes
3. Global bond indexes

Composite stock-bond indexes are developed to measure the performance of all securities in a given country.

Style indexes

Comparaison of indexes over time. the risk/return performances of indexes are different.

国际市场内的国际投资的低相关性

我们知道一个投行的不同部门的金融产品都存在有较低的相关性，国际市场内的金融投资存在着更低的相关性。