From: "a0000000000" 
Newsgroups: uk.finance
Subject: Re: Stock indeces
Date: Fri, 19 Sep 2003 14:28:29 +0000 (UTC)


"No Flipping"  wrote in message
news:3f6a2ec8$1_2@mk-nntp-2.news.uk.tiscali.com...
> "Roman Vasin"  wrote in message
> news:bkc9gv$r8l$1@news-reader4.wanadoo.fr...
> > Hi,
> >
> > Ok I will try to explain what I wanted. I am a programmer. I saw CNET
> > site, they created CNET Tech Index. Look for details here:
> > http://investor.news.com/Engine?Account=cnet&PageName=QUOTE&Ticker=$CNET
> >
> > Also they created sub-indices like: PC Software, PC Hardware, Server
> > Software, Semiconductors etc.
> >
> > My idea is to create sub-indeces inside software category only:
> > development tools (Borland), design tools (Adobe, Macromedia),
> > security (Symantec, Network Associates), games (Electronic arts) and
> > so on.
> > So my goal (an idea) is to track and understand which software
> > category is growing faster.
> >
> > In fact I can import price values of shares from some sites like
> > yahoo, for example, for Microsoft:
> >
> > http://finance.yahoo.com/q/hp?s=MSFT
> >
> > The problem is that quantity_stock can't be easily imported, I would
> > have to enter it manually.
> >

Use the market cap at the beginning to calculate the term
quantity_stock(base_date) and ignore subsequent changesas these will be a
problem.  One of the reasons MSCI and FTSE can charge a fortune for their
index data is that these changes are not straightforward and consistency is
important.

From comments below:

I have given you the correct basic calculation methodology for a FTSE type
index.

However, the real indices are more complicated because of changes to the
number of shares in issue for companies changes all the time.  The purpose
of the index is to track the change is prices weighted by market cap but
ignore changes in market cap. that would result of new shares being issued
and shares being redeemed.  As a result, there is effectively a change in
the base date index value everytime new shares for a company are issued or
removed from the index, although I think that unless significant, these
happen at fixed dated now.  Therefore the index value is calculated before
the change, the changes are made and the index divisor term (i.e. the
sum(price_stock(base_date)*quantity_stock(now))*base_index_value) is
adjusted to fit, with the base_date changing to the new date.  As a result
the changes to market weightings for new shares result in a seamless
transistion.


> See my other post if you want technical details of the correct
calculation.
> I don't know where to get correct weights (assuming you want to use market
> cap) from but you could always find out from the companies concerned - you
> will need to be careful because they can change with rights issues, scrip
> dividend issues, changes in ownership etc. etc.
>
> Also it is your own index so use whatever weights you want to use.  The
> DJIA30 is actually a price-weighted index - crap or what?  And yet it is
the
> most well known measure of US stock market levels.
>