Question: Discuss briefly several uses of security market indexes
Discuss briefly several uses of security-market indexes.
Answer to relevant QuestionsWhat major factors must be considered when constructing a market index? Put another way, what characteristics differentiate indexes?If you correlated percentage changes in the Dow Jones Total Stock Market Index with percentage changes in the NYSE composite and the NASDAQ composite index, would you expect a difference in the correlations? Why or why not?You are given the following information regarding prices for a sample of stocks.a. Construct a price-weighted index for these three stocks, and compute the percentage change in the index for the period from T to T + 1.b. ...Describe how you would compute the abnormal rate of return for a stock for a period surrounding an economic event. Give a brief example for a stock with a beta of 1.40.Describe the general goal of behavioral finance.
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