Stock entry: What is stock index and what is stock index

Stock entry: What is stock index and what is stock index

 

Stock entry: What is stock index and what is stock index

I. Index Definition

The stock index is the stock price index. It is a type of indicator number compiled by the stock exchange or financial service institution to indicate changes in the stock market. Due to stock price fluctuations and impermanence, investors are bound to face market price risks. It is easy for investors to understand the price changes of a specific stock, but it is not easy or annoying to know the price changes of multiple stocks one by one. To adapt to this situation and need, some financial service organizations use their own business knowledge and are familiar with the market advantages to prepare stock price indexes and publish them publicly, which serve as indicators for market price changes. Based on this, investors can test their own investment results and predict the trend of the stock market. At the same time, the press, company bosses, and even political leaders also use this as a reference indicator to observe and predict the social, political, and economic development situation.

This stock index indicates the average price of stock market changes. The stock index is usually based on a month of a year. The base price of the base period is used as 100, calculate the percentage of the sharding, that is, the stock index of the period. Based on the rise and fall of the index, investors can determine the trend of stock price changes. In addition, in order to reflect the stock market trend to investors in real time, almost all stock markets share price changes while publishing the stock price index instantly.

To calculate the stock index, three factors should be taken into account: first, sampling, that is, extracting a few representative constituent stocks among a large number of stocks; second, weighting, weighted average by unit price or total value, or non-weighted mean. The third is the calculation program, which calculates the arithmetic mean and geometric mean, or takes into account the price and total value.

Due to the wide variety of listed stocks, it is difficult and complex to calculate the average price or index of all listed stocks. Therefore, people often choose several representative Stock Samples from listed stocks, and calculate the average price or index of these samples. It is used to indicate the overall trend of stock prices and the increase or decrease of the entire market. When calculating the average or index of the stock price, the following four points are often taken into account: (1) the sample stock must be typical and common. Therefore, select a sample based on factors such as industry distribution, market influence, stock grade, and appropriate quantity. (2) The calculation method should have a high degree of adaptability and can make corresponding adjustments or corrections to the changing stock market conditions, so that the stock index or average has a better sensitivity. (3) Scientific Computing basis and means are required. The basis for calculation must be consistent, generally based on the closing price, but with the increase in the computing frequency, some are calculated at hourly or even shorter time prices. (4) the basis period should be balanced and representative.

Ii. exponential calculation method

When calculating the stock index, the stock index and the average share price are often calculated separately. By definition, the stock index is the average stock price. However, in terms of the actual effect of the two on the stock market, the average share price is a general level that reflects a variety of stock price changes, usually expressed in arithmetic mean. By comparing the average stock price in different periods, people can understand the stock price change levels. The stock index is a relative indicator that reflects the stock price changes in different periods, that is, the average stock price in the first period is used as the benchmark percentage of the average stock price in another period. Through the stock index, people can understand the percentage of the share price in the calculation period to increase or decrease from the base period. Because the stock index is a relative indicator, for a long period of time, the stock index can more accurately measure the changes of the stock price than the average stock price.

1. Calculation of average share price
The average stock price reflects the absolute level of the listed stock price at a certain time point. It can be divided into three types: simple arithmetic average stock price, corrected average stock price, and weighted average stock price. By comparing the average stock price at different time points, we can see the stock price changes and trends.
(1) Average simple arithmetic share price
The average arithmetic share price is the sum of the daily closing prices of the sample stock divided by the number of samples, that is:
Simple arithmetic average share price = (P1 + p2 + P3 +... + PN)/n
The world's first average stock prices-the way? Jones's average share price was calculated using a simple arithmetic average method before January 1, October 1, 1928.
Assume that the stocks sampled from a stock market are A, B, C, and D. The closing prices on a trading day are 10 yuan, 16 yuan, 24 yuan, and 30 yuan respectively, calculate the average share price of the market. Place the preceding numbers in the formula, that is:
Average share price = (P1 + p2 + P3 + P4)/n
= (10 + 16 + 24 + 30)/4
= 20 (RMB)
Although simple arithmetic stock price average is relatively simple to calculate, it has two disadvantages: First, it does not consider the weights of various sample stocks, therefore, we cannot distinguish the different effects of stocks with different importance on the average stock price. Second, when the stock of the sample is divided into red shares, capital increase, etc., the average share price will produce a fault and the continuity will be lost, making the comparison before and after the time series more difficult. For example, if the above D stock is divided into three shares by one, the stock price will inevitably be lowered from 30 yuan to 10 yuan. At this time, the average is not the 20 yuan calculated above, but (10 + 16 + 24 + 10)/4 = 15 (yuan ). That is to say, due to changes in the D-Share splitting technology, the average share price dropped from 20 yuan to 15 yuan (this has not considered other factors that affect the stock price change ), obviously, it does not meet the average value as a metric to reflect stock price changes.
(2) Average number of modified shares
There are two types of average corrected stock price:
The first is the divisor correction method, which is also a commendable correction method. This is the American road? Jones created a method in 1928 to calculate the average share price. The core of this method is to find a constant divisor to correct the change in the average share price caused by factors such as stock separation, capital increase, and red stock issuance, so as to maintain the continuity and comparability of the average share price. The specific method is to divide the total value of the new stock price by the average value of the old stock price, find the new divisor, and then divide the total value of the calculated stock price by the new divisor, which leads to the average value of the modified stock. That is:
New divisor = total new stock price after change/average old stock price
Corrected average share price = total share price during the reporting period/New Divisor
In the previous example, the divisor is 4, and the new divisor after adjustment should be:
New divisor = (10 + 16 + 24 + 10)/20 = 3. If the new divisor is substituted into the following formula, then:
The average corrected stock price = (10 + 16 + 24 + 10)/3 = 20 (RMB) returns the same average value as that calculated when the stock price is not split, the stock price level will not change due to stock splitting.
Second, the stock price correction method. The stock price correction method splits the stock, and restores the stock price after the change to the stock price before the change, so that the average stock price does not change accordingly. The New York Times adopted the stock price correction method to calculate the average stock price for the 500 stock price averages.
(3) weighted average share price
The weighted average share price is the average share price calculated based on the relative importance of various samples of stocks. The weight (q) can be the number of deals, total stock market value, and stock circulation.

2. Calculation of Stock Index
The stock index is a relative indicator that reflects stock price changes at different points. It is usually to compare the stock price in the reporting period with the fixed base period price, and multiply the ratio of the two by the base period index, that is, the stock index in the reporting period. There are three calculation methods for stock index: relative method, comprehensive method, and weighted method.
(1) Relative Method
The relative method, also known as the average method, is to calculate the stock index of each sample first. Add the sum of arithmetic mean values. The formula is as follows:
Stock Index = sum of stock indexes of N samples/n
The British economist general stock index uses this calculation method.
(2) Comprehensive Method
The overall method is to first increase the base period and the price of the sample stock respectively during the reporting period, and then calculate the stock index. That is:
Stock Index = sum of stock prices during the reporting period/sum of base stock prices
Enter the number as follows:
Stock Price Index = (8 + 12 + 14 + 18)/(5 + 8 + 10 + 15) = 52/38 = 136.8%
That is, the share price rose 36.8% from the base period during the reporting period.
From the calculation of the average method and the Comprehensive Method of stock index, both of them do not consider the circulation and transaction volume of different sampled stocks, but the impact on the stock price of the entire stock market is different. Therefore, the calculated indexes are not accurate enough. To make the stock index accurate, you need to add a weight, which can be a transaction volume or a circulation.
(3) Authorization
The Weighted Stock Index is weighted based on the relative importance of the sample stock in each period. Its weight can be the number of sold shares and the stock circulation. By time, the weights can be the base period or report period weights. The index with the base-period turnover (or circulation) as the weight is called the rasbayl index, and the index with the turnover (or circulation) as the weight during the reporting period is called the weight index.
The rasbayl index focuses on the number of base-period deals (or circulation), while the pai index focuses on the number of deals (or circulation) during the reporting period ). At present, most stock indexes in the world are stock dispatching indexes.

Iii. Stock Index and investment income

The stock index is a proportional function of the market value of the portfolio, and its increase or fall is the return rate of the portfolio. However, in the calculation of the stock index, the stock transaction cost is not deducted, so the actual earnings of the stock will be less than the increase or fall of the stock index, the rise or fall of the Stock Index is the biggest return on investment of the index portfolio.
There is often a saying in the stock market that "the bull earning bears compensate" means that the stockholders make profits in the bull market and lose money in the bear market. However, if the stockholders are analyzed as an overall investment, investors in the bull market may not be profitable.
1. If a bull market is reversible, the stockholders will only compensate for the loss. The Shanghai stock exchange index in China has an intermediate position of about 600 points. In the early 1500 bull market, Shanghai Stock Exchange broke through 300 points, and then fell back to points in. In, shanghai has rushed to 1000 points, but soon fell below 600 points. From the perspective of index operation over the past few years, the Shanghai Stock Index has always started from below 600, and has returned to 600 after a bull market. It can be said that all bull markets in the Shanghai stock market are reversible.
When the card index rushed from 600 to 1000 and then returned to the original place, for some investors, there may be profits and compensation, and the transfer of wealth between them. But for the groups of investors, they have not only no income but also some loss.
First, investors must pay the transaction tax and service fees for transactions at that point. The stock index rose from 600 points and then back to 600 points. For investors, there is no return on investment except for overhead transaction costs. The Shanghai stock market has at least half of the total transaction volume at this point. For investors, it is hard to pay more than half of the service fees and transaction taxes, because the purpose of investing in stocks is to get profits from the stock increase.
Second, investors have paid additional costs for the issuance of allotment and new shares. The issuance of allotment and new shares is always based on the price of the secondary market. The higher the secondary market share price, the higher the issue price. When the Index Returns below 600, for the investors who have shared shares or bought new shares above this point, it is equivalent to a lock, which is different from the secondary market, because the secondary market is only a transfer between the stockholders, no loss of funds. However, after high-priced stock allocation or purchasing new shares, the funds will flow to the listed companies. Such a lock in the first-level market will cause huge losses to the investors as a whole. For example, the cost per share of Tsingtao Beer is about 12.8 yuan, but its net assets are only 2 yuan per share. That is to say, the stockholders only bought 2 yuan of net assets for 12.8 yuan, no matter how the stock was launched later, the Tsingtao Beer stock was still worth 12.8 yuan. If investors use money to buy a Tsingtao beer to invest in treasury bonds or deposit banks, they will earn at least 1.3 yuan a year, regardless of the future of Tsingtao Beer, its annual average income is difficult to reach such a high level. Therefore, for a reversible bull market, the investors are regarded as an overall investment, and the investors only make compensation.

2. Even in a bull market, investors may not be able to make profits. The rise and fall of the Stock Index is the investor's return on investment, but the return on investment is nominal and the transaction cost is not deducted. For some mature western stock markets, the annual turnover rate is generally about 30%, and the transaction cost is generally negligible. In China's stock market, the turnover rate in the last two years is generally around 700 due to the frequent drop of the stockholders. If the transaction cost is included, the earnings of the stockholders in China are actually a negative number.
In 1994, the tradable shares of Shanghai and Shenzhen Stock Markets produced nearly 5 billion yuan of post-tax profits for the stockholders, but the total turnover of these two stock markets in the year was as high as 820 billion, based on the transaction volume of the Unit, the buyer and the seller each need to pay the 3I transaction tax and the handling fee of nearly 4.5i. The stockholders will spend 12 billion yuan in transaction costs in total, and the benefits and expenses will be reduced by 7 billion yuan.
Although the overall index of the Shanghai-Shenzhen stock market has risen a lot from the base of 100 points at the beginning, it is estimated that by 1995, in the five years, the listed companies in Shanghai and Shenzhen stock markets only produced 10 billion yuan of post-tax profits for the investors in the secondary market, while the transaction fees and taxes of the investors in this phase were as high as 20 billion yuan.
Compared with 1990, although the Stock Market in Shanghai and Shenzhen is still a bull market, the overall stock market is a loss, because the return given by listed companies to shareholders is difficult to offset the stock transaction expenses.

3. If a bull market leads the stock price to deviate from its investment value, the profit of the stockholders is virtual, and the profit of Some stockholders is based on the loss of others. In the short-term bull market, the stock market may create an illusion that everyone in the stock market is profitable. In fact, this kind of profit is virtual, because the overall value of the stock is calculated based on the transaction price of some stocks. When a stock is sold at a high price, the market value of some untraded stocks will be calculated based on the transaction price. The result is that the shareholder's book value of this stock increases. For example, if a listed company in China has more than 70% of State-owned or legal-owned shares not listed, some people often calculate the value of state-owned assets based on the market price, after the stock price rises, it is deemed that the value of state-owned assets has increased. However, if all the shares of a listed company are in circulation, the stock price will not reach the current stock market level due to the sharp increase in stock supply. Therefore, profits in the stock market cannot be calculated based on the transaction prices of others, but can only be calculated based on the transaction prices achieved at the time of sale. In addition, when the stock price is out of its investment value, the profit of some investors is based on the loss of other investors. If the annual after-tax profit of a stock is 0.1 yuan and the current one-year savings rate is 10%, the theoretical price of the stock should be 1 yuan. When some investors speculate on their prices to deviate from their investment values, for example, they have made a profit of 4 yuan by selling their prices from 1 yuan to 5 yuan, however, the investors who bought the 5 yuan account lost 4 yuan, because the actual benefit of the stock is only equivalent to the savings deposit of 1 yuan. Therefore, in stock hypes, it is generally the first buy after the purchase, and the new investors return the old ones.

China's Stock Index
1. The Shanghai stock index is a stock index prepared by the Shanghai stock exchange. It was officially released on April 9, December 19, 1990. The sample of the stock index is all the shares listed on the Shanghai Stock Exchange. The newly listed shares are included in the calculation range of the stock index on the next day.
The weight of the Stock Index is the total share capital of a listed company. Because the stock of a listed company in China is divided into tradable shares and non-tradable shares, the liquidity is not consistent with the total share capital, so the stock with a large total share capital has a greater impact on the stock index, the Shanghai stock index is often a tool used by large institutions to create a market. This makes the stock index trend different from that of most stocks.
The release of the stock index of the Shanghai Stock Exchange is almost in sync with the changes in the stock market. It is an essential reference for Chinese investors and securities practitioners to determine the trend of stock price changes.
2. The Shenzhen comprehensive stock index is a stock index prepared by the Shenzhen Stock Exchange. The base period of April 3, 1991 is the stock index. The calculation method of the stock index is basically the same as that of the Shanghai Stock Index. The sample shows all stocks listed on the Shenzhen Stock Exchange, and the weight is the total share capital of the stock. As a sample of all listed companies, it is very representative and widely published in sync with the Shenzhen stock market, it is an essential reference for investors and securities practitioners to determine the trend of stock price changes in Shenzhen stock market. In the past few years, as the stock exchange on the Shenzhen Stock Exchange was not as active as the Shanghai Stock Exchange, the Shenzhen Stock Exchange has now changed the stock index compilation method and adopted the stock index, among them, only 40 stocks were selected and released in May 1995.
The Shenzhen Stock Exchange now has two stock indexes: The old index Shenzhen comprehensive index and the current sub-stock index. However, judging from the operational trend over the past year, the difference between the two indexes is not particularly obvious.