A Stock Exchange is established by investors (both high-net-worth individuals and institutions) with the permission of the Government and works under the regulations of Security Exchange Commission.
The Stock Exchange enlists the Public Limited Companies, with the commitments, to provide a marketplace where the companies’ share holders or investor could sell or purchase (trade) shares/stocks, transparently, safely and reliably, whenever required. The listed Companies taking benefit or these marketplaces, issue their shares to general public, investors, and institutions, to raise sizable capital for their business requirement.
The Stock exchange members/brokers who are also the managers of the Stock Exchange, design marketing strategies, to attract further companies and investors, so as their trading volume keep multiplying with their addition of free-float shares and so their commission!
The stocks trading and investment to be fair and reliable, is regarded as the major responsibility of the Exchange managers/brokers. The trading features and procedures are made transparent, dependable, and reliable to help shares best price-discovery (best prices for buyer and sellers) and provide a level paying field to all market participants.
As a part of marketing strategy, the exchange managers, from all of their listed Companies, make a group of the best performing Companies (the performance is usually measured by trading volume and which is logically resulted due to their profitable business prospects or pay-out of dividends / profits to their Share Holders!). Each listed Company of the group (say 40 Companies’ Group – like CAC-40 Index) according to its Capital worth claims its weightage in the Index.
Suppose a XYZ Exchange has to develop a 40 Companies Index (XYZ-40) where, ten companies each have 10 million dollars capital worth, twenty companies have each 7.50 million dollars capital worth and the rest ten have each 5.0 million dollars capital worth. Their combined capital worth, 300 Million Dollar, will be called Market Capitalization. If we divide 300 Million Dollars Market Capitalization by 40 companies, the XYZ-40 index will stand at 7.50 Points, where each Index Point would refer to 40 Million Dollars Market Capital. If Market's XYZ-40 Index surges to 5.0 Points (7.50+5.0), we would say Market Capitalization increased by 200 Million Dollars, and if the Market's XYZ-40 Index plunges 5.0 Points (7.50-5.0), we would say Market Capitalization decreased by 400 Million Dollars.
The first ten companies, having 33.33% combined Market Capital, will have each 3.333 weightage (weighted-average), twenty companies, having 50% Capital Share, will have each 2.50 weightage, and the rest ten companies, having 16.67% Capital Share, will have each 1.667 weightage in the Market Capitalization - Index XYZ-40.
The Stock Exchange enlists the Public Limited Companies, with the commitments, to provide a marketplace where the companies’ share holders or investor could sell or purchase (trade) shares/stocks, transparently, safely and reliably, whenever required. The listed Companies taking benefit or these marketplaces, issue their shares to general public, investors, and institutions, to raise sizable capital for their business requirement.
The Stock exchange members/brokers who are also the managers of the Stock Exchange, design marketing strategies, to attract further companies and investors, so as their trading volume keep multiplying with their addition of free-float shares and so their commission!
The stocks trading and investment to be fair and reliable, is regarded as the major responsibility of the Exchange managers/brokers. The trading features and procedures are made transparent, dependable, and reliable to help shares best price-discovery (best prices for buyer and sellers) and provide a level paying field to all market participants.
As a part of marketing strategy, the exchange managers, from all of their listed Companies, make a group of the best performing Companies (the performance is usually measured by trading volume and which is logically resulted due to their profitable business prospects or pay-out of dividends / profits to their Share Holders!). Each listed Company of the group (say 40 Companies’ Group – like CAC-40 Index) according to its Capital worth claims its weightage in the Index.
Suppose a XYZ Exchange has to develop a 40 Companies Index (XYZ-40) where, ten companies each have 10 million dollars capital worth, twenty companies have each 7.50 million dollars capital worth and the rest ten have each 5.0 million dollars capital worth. Their combined capital worth, 300 Million Dollar, will be called Market Capitalization. If we divide 300 Million Dollars Market Capitalization by 40 companies, the XYZ-40 index will stand at 7.50 Points, where each Index Point would refer to 40 Million Dollars Market Capital. If Market's XYZ-40 Index surges to 5.0 Points (7.50+5.0), we would say Market Capitalization increased by 200 Million Dollars, and if the Market's XYZ-40 Index plunges 5.0 Points (7.50-5.0), we would say Market Capitalization decreased by 400 Million Dollars.
The first ten companies, having 33.33% combined Market Capital, will have each 3.333 weightage (weighted-average), twenty companies, having 50% Capital Share, will have each 2.50 weightage, and the rest ten companies, having 16.67% Capital Share, will have each 1.667 weightage in the Market Capitalization - Index XYZ-40.
Some of the worlds' best indices which are including famous multi-billion brands are: S&P 500 Index, Nasdaq 100 Index, FTSC 100 Index, CAC 40 Index, and so on.
The construction of Index is very important to be comprehended well so as the World Indices Trading could be thoroughly understood and beneficial! The role of the companies' weightage in the Index and their individual or combined impact, to move Up (surge) and Down (plunge) Index, should be very explicitly understood.
Now, by grouping companies sector-wise and calculating their combined weightage, will help you better assess the Index movement direction! Any news or economical indicators will further supplement the assessment refining to its best, too!
So, the weightage of the Sector and the News will combinely make the Bullish or Bearish Sentiment to move the Index in your favor ! If the news is in bulk negative- Place Sale Order, or Place Buy Order, if everything is blue!
The Indices movement in comparison to individual Stocks is quite understandable and could easily be assessed!
Most of the time, the economy indicators alone drive the market direction. Strong or positve indicators will drive the market Up while depressed or weak indicators will drive it Down or invite profit taking, which is technically termed as market correction.
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