Chapter 9 Activity – Stock Indexes From the textbook: “Stock market indexes are

Chapter 9 Activity – Stock Indexes
From the textbook: “Stock market indexes are designed to show the performance of the stock
market. However, there are many stock indexes, and it is difficult to determine which index best
reflects market actions … The three indexes below are used as a benchmark for comparing
individual stocks with the overall market, for measuring the trend in stock prices over time, and
for determining how various economic factors affect the market.”
Answer the questions about the three major stock indexes below by performing your own
independent research.
Dow Jones Industrial Average (DJIA)
1. How many companies comprise the DJIA, and how are the companies selected?
2. Explain what the Dow Divisor is. Why does it exist?
3. The DJIA uses a price-weighted method to calculate its index value. What does this
mean (how does it work)?
4. Describe the major criticisms of the DJIA.
Standard & Poor’s 500 Index (S&P 500)
5. How many companies comprise the S&P 500, and how are the companies selected?
6. The S&P 500 uses a market-capitalization weighted method to calculate its index value.
What does this mean (how does it work)?
NASDAQ Composite Index (NASDAQ)
7. How many companies comprise the NASDAQ Index, and how are the companies
selected?
8. How is the value of the NASDAQ Index calculated?
General Questions
9. What are the current index values for the DJIA, S&P 500, and NASDAQ?
10. Market-capitalization method indexes are generally viewed as superior to price-weighted
indexes. Despite that, the DJIA still has a very strong following and is often used to
discuss the financial health of the US economy. Why do you think this is

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From the textbook: “Stock market indexes are appeared first on Solved Students Assignments.