Hi
They are Equal dollar weighted:
>From the HGS help file:
Equal Dollar Weighted Index
General comment about Equal Dollar Weighting: Equal dollar weighting means that
on the start date of the index an equal amount of money is invested in each
stock. This will "purchase" a different number of shares of each stock. That
start date is then scaled to a value of 100. Then each day after that the
value of the index is computed. As a result percent changes in the index have
little correlation with average gain of stocks (unless you make the index a
price average index). In addition due to the scaling to 100 on the index start
date the percents will be very different. The two things are vastly different.
This is why HGSI has the Group performance analysis tool (in the Designer) to
compute the performance of stocks and not an index percent change. The GPA
solves the start date issue as well percent differences. Not that HGSI indexes
are wrong, they just don't correlate 100% when you try to do a manual % change
calculation of dates looking at chart values. And shouldn't.
Detailed explanation of Equal Dollar Weighting: One means of calculating
cumulative price performance of a group of securities is by creating an
equal-dollar weighted index. An equal-dollar weighted index calculates the
performance of a group as if you invested the same amount of money in each
security.
For each security in the index, the HGSI calculates the number of shares you
could buy given an investment amount on the Index's base date (Investment
Amount / Base Price). The number of shares calculated are not rounded
resulting in fractional shares. In this case where you want equal contributions
from each security, fractional shares work well.
On a daily basis, the HGSI computes how much those shares are worth using the
current days closing share price to determine your position value. (current
price - base price) * # shares purchased + investment amount)
The position value for each of the securities that make up the index are added
together. This total is divided by the total amount of money invested in this
index. This number is then normalized by multiplying by 100 so that on index
start date it is worth 100. (position value1 + position value 2.) / total
investment amount * 100).
An index value of 100 means your (basket, portfolio, industry) has broken
even, neither losing or gaining. Values higher than 100 means it has made
money. Values less than 100 means it has lost money.
The following table shows the Equal Dollar Index using Ford and General Motors
as the group.
Date
Ford Price
GM Price
Ford Shares
GM Shares
Ford Position
GM Position
Index Value
11/1/85
5.25
33.75
1904.761
296.2963
10,000
10,000
100
11/4/85
5.25
33.813
"
"
10,000
10,018.7
100.093
:
:
:
:
:
:
:
:
04/9/98
46.875
67.437
1904.7619
296.2963
89,285.7
19,981.5
546.336
The following table give some reasons to use Equal Dollar Weighted. If you
used a "Price Value Weighted Index", Intel (INTC) would overshadow the
contribution of the other two stocks. Similarly, a "Market Value Weighted
Index" would favor Intel with 885,000,000 shares outstanding. An "Equal Dollar
Weighted Index" is the only way to build an indicator allowing for equal
contribution from each security in the group.
Security
Investment
Price on Index Start Date (Base Price)
Shares purchased on index start date
Shares Outstanding (thousands)
INTC
10,000
133.25
75.0469
885,000
AB
10,000
49.88
`2000.4812
16,341
GLM
10,000
21.50
465.1163
168,189
Using the Equal Dollar Weighted index, you can analyze the past performance of
a group, or weigh the consequences of including or omitting various securities
from the group. You could also use this approach to compare the performance of
two or more groups of stocks by comparing their resulting indicators.
----- Original Message -----
From: dbnewyork
To: [email protected]
Sent: Monday, April 23, 2007 3:23 AM
Subject: [quotes-plus] !ID indexes
Are these indexes averages of the symbols? Or are they cap weighted?
Thanks,
db
