What major factors must be considered when constructing a market index? Put another way, what characteristics differentiate indexes?
Answer to relevant QuestionsExplain how a market index is price weighted. In such a case, would you expect a $100 stock to be more important than a $25 stock? Give an example.There are high correlations between the monthly percentage price changes for the alternative NYSE indexes. Discuss the reason for this similarity: is it size of sample, source of sample, or method of computation?a. Given the data in Problem 1, construct an equal-weighted index by assuming $1,000 is invested in each stock. What is the percentage change in wealth for this portfolio?b. Compute the percentage of price change for each of ...Assume you want to test the EMH by comparing alternative trading rules to a buy and hold policy. Discuss the three common mistakes that can bias the results against the EMH.What does the EMH imply for the use of technical analysis?
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