Faqs about Indices
What should a stock market index be?
What do the ups and downs of an index mean?
What is the basic idea in an index?
What kind of averaging is done?
What is the portfolio interpretation of index movements?
Why are indices important?
What kinds of indices exist?
Isn't averaging like diversification; cancelling out vulnerability to one stock?
Then a larger number of stocks in an index will give more diversification -- isn't that a good thing? Why don't we put all the stocks of the country into the index?
Component illiquidity contaminates index
What is wrong with the price information for illiquid stocks?
A stock may be liquid on one exchange and illiquid on another -- what price do you take when calculating the index?
What is 'stale prices'?
What is 'bid-ask bounce'?
What about market manipulation - how would manipulation of an index take place, and how would an index be made less vulnerable to manipulation?
So diversification yields diminishing returns, and illiquid stocks are best kept out of an index.... what is the ideal middle road?
The Nifty 50
How does Nifty 50 work?
What is 'impact cost'?
What do you mean by 'an Nifty 50 trade'?
What's the impact cost on a trade for 5 million of the full Nifty 50?
Why does the index keep changing from time to time?
When a stock goes out and a new stock comes in, doesn't that make index levels non-comparable?
Index revision sounds dangerous in terms of political pressures. Won't speculators try to push a stock they have purchased into Nifty 50? Or remove a stock from the index when they are shorting it?
High quality information
How is the Nifty 50 closing price calculated?
What is special about the NSE closing price?
What about dividends?
You say that buying a Nifty 50 portfolio yields the same returns as percentage changes on the Nifty 50 index. But the weights will have to keep on changing from day to day when market caps change?
So when do weights in an index change?
What historical data for Nifty 50 is available?
Where do I get data for Nifty 50?
What index should be used for index funds?
What about index futures?
What is hedging effectiveness?
Why not form a small portfolio of the ten most liquid stocks, and work to ensure that the small portfolio is maximally correlated with the Nifty 50 ?
Alternatives to the Nifty 50
How does Nifty 50 compare with other indices?
How did the Nifty 50 come about?
Where does IISL come in?
We sometimes hear the term 'nifty fifty' used in the US to denote a certain set of growth stocks. Is there any connection?