By Meziani
Alternate Traded money (ETF's) are a comparatively new open- ended funding car. introduced in 1993, their allure as an incredible and distinctive monetary product has forced institutional and retail traders to seem anew at their virtually unending chances. This has resulted in their dramatic enlargement. Meziani attracts from his educational and company services to straddle either conception and perform. utilizing this booklet, practitioners, lecturers and scholars alike will discover a thorough rationalization of the theoretical rules underlying ETF's, besides their precise research, communicated in functional and transparent phrases.
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Extra info for Exchange-Traded Funds as an Investment Option
Sample text
3 The Wilshire 5000 index tracks the total market value of all stocks listed on the New York and American Stock Exchanges, virtually the overall population of stocks that are actively traded in the United States. When the index was created in 1974, it contained 5000 stocks, but has since grown to include over 5000 companies. It is considered the most broadly based index. 4 Although these three indexes were designed to track the market, it is clear that the breath of coverage is different for each market indicator.
SECURITY MARKET INDEXES 31 The NYSE Composite Index The NYSE Composite Index is another fairly good indicator of general market strength. It was established in 1966 to cover all the stocks from more than 1500 companies listed on the Exchange. It is calculated as a valueweighted index, herein by the same method Standard & Poor’s uses to calculate its indexes. The market value of each stock is calculated by multiplying its price per share by the number of shares listed. The sum of the individual market value is then expressed relative to a base point market value, set at 50 since December 31, 1965.
Instead of identifying specific securities for purchase, portfolio managers seek to duplicate the composition of an index. For example, the Vanguard Index Trust-500 portfolio seeks to mirror the market as measured by the S&P 500 stock index. Hence, while both buy-and-hold and indexing are passive strategies, the latter is more likely to capture the efficiency of the market. An index that represents the theoretical market portfolio is more able to offer the highest level of return per unit of risk, which constitutes the underpinning of capital market theory.