Measuring Stock Market Performance

1
Measuring Stock Market Performance

• Many different indexes measure stock market
  performance
• Vary by
• where stock is traded
• type of business
• reputation of company
• size of company

2
Measuring Company Size

• Market Capitalization is how companies are
  commonly measured for size
• Market Cap Stock Price x Shares Outstanding
• Large Cap gt 12 Billion
• Mid Cap 1 - 12 Billion
• Small Cap lt 1 Billion

3
Dow Jones Industrial Average

• Oldest stock market index
• Created in 1896 with 12 companies
• Currently tracks 30 companies chosen by editors
  of WSJ
• Companies are large cap blue chip leaders in
  their fields
• www.djindexes.com Averages FAQ

4
Calculation of the Dow

• Originally, the Dow was the sum of the 12 stock
  prices divided by 12
• Over time, as companies were added, deleted,
  merged, had stock splits, etc., the divisor was
  adjusted to preserve historical continuity
• You can compare the Dow today to the Dow in 1896
  to see how the value of the stock market has
  grown.

5
SP 500 Index

• Index kept by Standard Poors that follows the
  500 largest publicly traded companies in the US
  stock market
• Best measure of large-cap stock performance
• Preferred by professionals over the Dow to
  measure market performance
• www.spglobal.com

6
Nasdaq Composite

• Measures all companies listed on the Nasdaq Stock
  Market
• Includes over 3000 companies
• Began in 1971 with a base of 100.00.

7
Russell 2000 Index

• Russell 3000 Index measures the performance of
  the 3000 largest US companies
• Russell 2000 Index measures the performance of
  the 2000 smallest companies in the Russell 3000
  Index
• 8 of total market cap of Russell 3000
• Widely used to measure small company stock
  performance

8
Wilshire 5000 Equity Index

• Measures the performance of all U.S.
  headquartered stocks with readily available price
  data.
• Includes over 5,200 stocks.
• Broadest measure of market performance.

9
Interpreting Stock Indexes

• Dont look at absolute point change
• Look at percentage change
• For example, news anchor reports that the Dow
  lost 150 points but the NASDAQ only went down by
  30 points - the 30 point drop actually works out
  to be a higher percentage loss!!!