RSM230 Summer 2012
FINAL EXAM STUDY NOTES!
CH.8 - Stock Indices and Averages
Index – a number that measures a number of stock prices so that a percentage change in this
index can be calculated over time. They serve as the underlying assets for options, futures,
Average – used for the same purpose, but is determined by summing up the number of prices
and diving by the number of items (equally weighted).
S&P/TSX Composite Index – determined by the total market capitalization of a portfolio of
the most actively traded Canadian stocks. It’s a market/value-weighted index. The stocks
are reviewed every quarter, and stocks can be replaced. A base value of 1000 was set in
S&P/TSX 60 – base is 100
MidCap index contains 60 stocks that rank below S&P/TSX 60 in market cap, while the SmallCap
index contains the remaining stocks.
Dow Jones Industrial Average (DJIA) – most widely quoted measure of NYSE stock
performance, but only includes 30 stocks. It’s a price-weighted average, which reflects the
highest quality blue chip stocks in the US. Due to its low risk, it tends to underperform
broader indices like the S&P 500.
S&P 500 Index – broader based market-weighted index that measures US stocks. It’s used to
measure the investment performance of institutional investments.
NASDAQ Composite Index – contains over 4000 OTC stocks and is market valued.
Wilshire 5000 Equity Index measures almost everything, and is the broadest based US
NYSE maintains market valued indices which include listed equities for: composite, industrials,
transportation, finance and real estate, and utilities.
Others Include: Nikkei (price weighted), FTSE 100 (UK, market weighted), DAX (Germany,
value-weighted with 30 blue chips).
Financials is NOT a subsector index in the Canadian market.
Under the Canadian system, capital gains are taxed at a rate equal to 50% of regular
Pari Passu – when different classes of preferred shares have the...