Index Calculation Primer
Roger J. Bos, CFA
Senior Index Analyst
Standard & Poors
roger_bos@standardandpoors.com
July 17, 2000
Roger J. Bos, CFA - Standard & Poor's Quantitative Services 2
What is an index?
An index is a single descriptive statistic that
summarizes the relative change in an
underlying group of variables.
In an equity index, such as the S&P 500, the
underlying variables are stocks.
The main differences among indexes is the
types of securities held and the weighting
scheme.
Roger J. Bos, CFA - Standard & Poor's Quantitative Services 3
Index Groupings
There are many types of indexes, each
trying to measure different groups of stocks:
Broad based Narrow
Small Cap Economic Sector
Mid Cap Industry
Large Cap
Value
Growth
Geographic region
Or any combination of the above.
Roger J. Bos, CFA - Standard & Poor's Quantitative Services 4
Index Groupings
These groupings are usually based on
simple financial ratios.
Size (small, mid,......
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