Question

What are the factors affecting construction of stock market index?

Answer 1

Answer:

Many factors can cause the price of a stock to rise or fall – from specific news about a company's earnings to a change in how investors feel about the stock market in general.

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Key point

company news and performance.

industry performance.

investor sentiment.

economic factors

Explanation:

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Answer 2

The answer is stated below:

Explanation:

• Factors or the elements which affect the construction of the stock market index are:

1. Sample Size - The sample size should be large adequate so that could be statistically significant.
2. Choosing the base year - While the selecting the base year for construction, it should be a normal year.
3. Uniform - The index should maintain continuity as well as there should be any change in the manner that index is constructed
4. Weighting criteria - There are 3 criteria for weighting, which are Market value weighted series, Price weighted and equally weighted.
5. Representativeness - It should the representative of the aggregate population.
6. Convenient units - The index need to stated or represent into the convenient units.

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