The S&P 500 and the Dow Jones Industrial Average indices are proxies for the broader US stock
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Question:
The S&P 500 and the Dow Jones Industrial Average indices are proxies for the broader US stock market.You notice one day that the S&P 500 closed UP by 0.20%, while the DJIA closed DOWN by 0.20%.
Explain how it is possible for one proxy(S&P 500) to have a positive return while the other (DJIA) has a negative returnon any given day.Include in your explanation some names that could have caused this discrepancy. Which return(S&P 500 or DJIA) is more indicative of the 'true market return'?
Hint: Recall the S&P 500 contains the largest 500 US companies where the weight of each name is proportional to its market value.The DJIA is a price-weighted index comprised of select 30 names representing certain industries.(15 points)
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